Abstract
Regional geographic diversification helps multinational enterprises (MNEs) to obtain learning opportunities and dynamic capabilities for innovation. However, due to the turbulent environments associated with doing business internationally, the effectiveness of regional geographic diversification can be contingent on internal and external situations. Drawing on contingency theory, this study investigates whether the regional geographic diversification-innovation relationship is moderated by the MNEs’ internal (organizational change and churn in human resources) and external environmental dynamics (industrial growth and instability). To empirically test the hypotheses, this research uses multi-source and time-lagged data obtained from 323 manufacturing companies and 850 observations in a nine-year period in Korea. We find that regional geographical diversification is positively related to organizational innovation. The effect of regional geographical diversification on organizational innovation is stronger under the high organizational change. The relationship between regional geographical diversification and organizational innovation is moderated by churn in human resources but in an opposite direction. The effect of regional geographical diversification on organizational innovation is positively moderated by industry instability. Theoretical and managerial implications of the study are discussed.
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