Revisiting the relationship between product diversification and internationalization process in the context of emerging market MNEs

Abstract

We examine the contingent effect of existing product diversification on the scope and speed of firms’ subsequent internationalization. Understanding these effects is important because prior research on the product—geographic diversification relationship assumes that the relevant decisions are taken simultaneously. This assumption does not apply to firms that consider international expansion only after having grown domestically through product diversification. Drawing on and extending transaction cost logics, we argue that product-diversified firms following geographically diverse and rapid internationalization incur higher transaction costs and are thus less likely to do so. We also find that international experience plays a moderating role.