Abstract
We explore how digitalization transformation acts a mechanism through which international diversification affects the performance of multinational enterprises. We argue that internationally diversified firms have greater opportunities, but also face greater pressures to engage in digital transformation. In turn, increased digital transformation enhances firm performance. Digital transformation thus acts as a mechanism through which international diversification affects firm performance. We further argue that the effect of international diversification on a firm’s digital transformation varies with the industry that a firm operates in. We test our predictions empirically with a sample of 451 firms in the S&P 500 from 2010 to 2018. Our results show that digital transformation is a mechanism through which international diversification affects the performance of MNEs.
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