How do resources and diversification strategy explain the performance consequences of internationalization?

Abstract

Purpose– The purpose of this paper is to examine how firm resources and diversification strategy explain the performance consequences of internationalization of emerging market enterprises.Design/methodology/approach– The paper conducts a regression analysis by using a novel panel data set comprising of 685 listed Chinese firms over the period of 2008-2011.Findings– The results show that the relationship between internationalization and performance is inverse U-shaped. Further, marketing resources play a greater role in enhancing the performance effects of internationalization than technological resources do. Related product diversification enhances the performance effects, while unrelated product diversification does the contrary.Research limitations/implications– The study focusses on listed firms in one country, and as a result, the findings cannot be generalized to non-listed firms and firms in other countries.Practical implications– This paper offers guidelines for international managers to improve performance of internationalization by developing a particular type of resources and diversification strategy.Originality/value– This paper extends the literature on the functional form of the internationalization-performance relationship, and further suggests that the analysis of the performance consequences of internationalization should go beyond the nexus between internationalization and performance, and focusses on firm-specific resources and strategies that may facilitate or constrain the performance effects of internationalization.