Abstract
Research suggests that many MNEs face the challenge of geographical overstretching – defined as international expansion beyond what a company’s dynamic capabilities allow. This issue is especially challenging for companies pursuing global economies of scale while being locally responsive. This paper argues that the regional integration of FDI locations can alleviate the negative performance effect of certain international expansion. The analysis of global automotive industry from 2003 to 2019 shows that regional integration of FDI locations across the value chain helps MNEs to reduce the negative performance effect of inter-regional diversification. By contrast, regional integration of upstream investments or downstream investments has no such benefit and can even hinder organizational performance. The present research enriches our understanding of MNE geographic scope and regional strategy interface, by delineating the role of regional integration of investment locations in inter- and intra-regional diversification.
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