Hostname: page-component-848d4c4894-hfldf Total loading time: 0 Render date: 2024-06-08T12:01:04.802Z Has data issue: false hasContentIssue false
  • English
  • Français

Is the Interaction of International Diversification and Economic Performance a Linear Relationship?

Published online by Cambridge University Press:  18 September 2015

Nicholas C. Mangos ,
Peter W OBrien  and
Richard Damania
Nicholas C. Mangos
Affiliation:
School of Commerce, Flinders University of South Australia, GPO Box 2100, Adelaide SA 5001, Australia, Phone: +61 8 8201 2361, Fax: +61 8 8201 2644, Email. nicholas.mangos@flinders.edu.au
Peter W OBrien
Affiliation:
School of Commerce, Adelaide University, Adelaide SA 5005, Australia, Phone: +61 8 8303 3105, Fax: +61 8 8383 4368, Email. peter.obrien@adelaide.edu.au
Richard Damania
Affiliation:
School of Economics, Adelaide University, Adelaide SA 5005, Australia, Phone: +61 8 8303 4933, Email. richard.damanio@adelaide.edu.au
Get access Rights & Permissions [Opens in a new window]

Abstract

The current study analyses the effect of an international diversification strategy measured by multi-nationality and country scope, and tests its relationship with economic performance in the context of Australian corporate activity. Evidence from previous US studies on the relationship between international diversification strategy and economic performance was inconclusive, which suggests that research should go further with empirical analysis than testing for a linear relationship and should test for curvilinear relationships resulting from transactions costs analysis. Guided by that evidence a Chow test was used in the current study to establish a cut-off point that divided the sample of Australian firms into two subgroups (low-to-moderate and high level international diversification) to determine whether a non-linear relationship existed between economic performance and international diversification. This approach followed a similar technique used by Hitt, Hosskisson and Kim, (1997) and was used in this study as a method for determining two subgroups. The sample was selected from the population of large firms in Australia over a three-year period covering 1993-1995. The results suggest there is a statistically significant non-linear relationship between economic performance and multi-nationality. The results suggest that Australian corporations may be sensitive to the effect of transaction and managerial processing costs on the relationship between multi-nationality and economic performance resulting in a non-linear relationship.

Type
Research Article
Information
Journal of Management & Organization , Volume 8 , Issue 1 , 2002 , pp. 21 - 31
Copyright
Copyright © Cambridge University Press and Australian and New Zealand Academy of Management 2002

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

REFERENCES

Bettis, R. & Hall, W. 1982, ‘Diversifcation strategy, accounting determined risk, and accounting determined return’, Academy of Management Journal, vol. 25, no. 2, pp. 254–264.Google Scholar
Cochran, P. & Wood, R. 1984, ‘Corporate social responsibility and financial performance’, Academy of Management Journal, 27, 42–56.Google Scholar
Daniels, J. & Braker, J. 1989, ‘Profit performance: Do foreign operations make a difference?’, Management International Review, vol.29, no.1, pp. 46–56.Google Scholar
Geringer, J., Beamish, P. & da Costa, R. 1989, ‘Diversification strategy and internationalization: Implications for MNE performance’, Strategic Management Journal, vol.10, pp. 109–119.CrossRefGoogle Scholar
Gomes, L. & Ramaswamy, K. 1999, ‘An empirical examination of the form of the relationship between multi-nationality and performance’, Journal of International Business Studies, 30, 1 (First Quarter 1999), pp. 173–188.CrossRefGoogle Scholar
Grant, R. 1987, ‘Multi-nationality and performance among British manufacturing companies’, Journal of International Business Studies, no.22, pp.249–263.Google Scholar
Grant, R., Jammine, A. & Thomas, H. 1988, ‘Diversity, diversification, and profitability amongst British manufacturing companies’, Academy of Management Journal, vol.31, pp. 771–801.Google Scholar
Gujarati, D. 1999, Essentials of Econometrics, Second Edition, Irwin McGraw-Hill.Google Scholar
Haar, J 1989, ‘A comparative analysis of the profitability performance of the largest U.S. European and Japanese multinational enterprises’, Management International Review, vol.23, no.3, pp. 5–18.Google Scholar
Hamel, G. 1991, ‘Competition for competence and interpartner learning within international strategic alliances’, Strategic Management Journal, vol. 12, pp. 83–103.CrossRefGoogle Scholar
Herremans, I., Akathaporn, P. & McInnes, M. 1993, ‘An investigation of corporate social responsibility reputation and economic performance’, Accounting, Organizations and Society, 18, 7/8, 587–604.CrossRefGoogle Scholar
Hitt, M., Hoskisson, R. & Ireland, R. 1994, ‘A mid-range theory of the interactive effects of international and product diversification on innovation and performance’, Journal of Management, 20, 2, 297–326.CrossRefGoogle Scholar
Hitt, M., Hoskisson, R. & Kim, H. 1997, ‘International diversification: Effects on innovation and firm performance in product-diversified firms’, Academy of Management Journal, vol.40, no.4, pp.767–798.Google Scholar
Hitt, M. & Middlemist, D. 1978, ‘The measurement of technology within organizations’, Journal of Management, vol 4, pp. 47–67.CrossRefGoogle Scholar
Hoskisson, R., Hitt, M., Johnston, R. & Moesel, D. 1993, ‘Construct validity of an objective (entropy) categorical measure of diversification strategy’, Strategic Management Journal, vol 14, p.215–235.CrossRefGoogle Scholar
Jones, G. & Hill, C. 1988, ‘Transaction-cost analysis of strategy-structure choice’ Strategic Management Journal, vol.9, pp. 159–172.CrossRefGoogle Scholar
Keats, B. 1988, ‘The vertical construct validity of business economic performance measures’, The Journal of Applied Behavioural Science, vol 24, No. 2, pp. 151–160.CrossRefGoogle Scholar
Kim, W., Hwang, P. & Burgers, W. 1989, ‘Global diversification strategy and corporate profit performance’, Strategic Management Journal, vol.10, pp.45–57.Google Scholar
Kogut, B. 1985, ‘Designing global strategies: Comparative and competitive value added chains (part 1)’, Sloan Management Review, Summer, no.27, pp. 15–28.Google Scholar
Kumar, M. 1984, Growth, Acquisition and Investment, Cambridge University Press, Cambridge.Google Scholar
Lewis, G. & Jarvie, K. 1998, ‘The relationship between diversification and performance: The Australian experience’, in Management Theory and Practice, ed Griffin, G., MacMillan Education Australia, 254–282.Google Scholar
Lewis, G. & Minchev, T. 1998, ‘Researching internationalisation strategies of Australian companies: Data access problem’, Paper presented at the 12th Australia and New Zealand Academy of Management, International Conference, 12 6-9, Interactive stream.Google Scholar
Mangos, N. 2000, Investigating Economic Performance: Whether International & Strategic Business Diversification with Stakeholder Concerns Enhances Perfor-mance, Unpublished Doctoral Thesis, Adelaide University.Google Scholar
McGuire, J., Sundgren, A. & Schneeweis, T. 1988, ‘Corporate social responsibility and firm financial performance’, Academy of Management Journal, 31,4, 854–872.Google Scholar
Michael, , & Shaked, I. 1986, ‘Are multinational corporations safer?’, Journal of Inter-national Business Studies, vol.17, pp. 63–82.Google Scholar
Morck, R. & Yeung, B, 1991, ‘Why investors value multi-nationality’, Journal of Business, no. 64, pp. 165–187.CrossRefGoogle Scholar
Preston, L. 1978, ‘Analysing corporate social performance: Methods and results’, Journal of Contemporary Business, vol. 7, no. 1, pp. 135–149.Google Scholar
Ramaswamy, K. 1995, ‘Multi-nationality, configuration, and performance: A study of MNEs in the US drug and pharmaceutical industry’, Journal of International Management, vol 1, pp. 231–253.Google Scholar
Robins, J. & Wiersema, M. 1995, ‘A resource-based approach to the multibusiness firm: Empirical analysis of portfolio interrelationships and corporate financial performance’, Strategic Management Journal, vol 16, p. 277–299.CrossRefGoogle Scholar
Rugman, A. 1979, International Diversification and the Multinational Enterprise, M.A: Lexington Books, Lexington.Google Scholar
Rumelt, R. 1974, Strategy, Structure and Economic Performance, MA.: Harvard, Cambridge.Google Scholar
Simmonds, P. 1990, ‘The combined diversification breadth and mode dimensions and the performance of large diversified firms’, Strategic Management Journal, vol 11, no.5, pp. 399–410.CrossRefGoogle Scholar
Studenmund, A. 1985, Using Econometrics: A Practical Guide, Second Edition, Harper Collins.Google Scholar
Tallman, S. & Li, J. 1996, ‘Effects of inter-national diversity on the performance of multinational firms’, Academy of Manage-ment Journal, vol.39, no.1, pp. 179–196.Google Scholar
Ullmann, A. 1985, ‘Data in search of a theory: A critical examination of the relationships among social performance, social disclosure and economic performance of U.S. firms’, Academy of Management Review, vol 10, no. 3, pp. 540–557.Google Scholar
Varadarajan, P. & Ramanujam, V. 1987, ‘Diversification and performance: A reexamination using a new two-dimensional conceptualization of diversity in firms’, Academy of Management Journal, vol 30, no. 2, pp. 380–393.Google Scholar
Vernon, R. 1971, Sovereignty at Bay: The Multinational Spread of US Enterprises, Basic Books, New York.Google Scholar
Waddock, S. & Graves, S. 1997 ‘The corporate social performance-financial performance link’, Strategic Management Journal, vol. 8, no. 4, pp 303–319.3.0.CO;2-G>CrossRefGoogle Scholar
Wolf, B. 1975, ‘Size and profitability among US manufacturing firms: Multinational versus primarily domestic firms’, Journal of Economics and Business, 28, pp. 15–22.Google Scholar