Corporate diversification: the impact of foreign competition, industry globalization, and product diversification

Abstract The globalization of markets and industries has fundamentally changed the competitive conditions facing firms. Yet, how globalization has influenced the international diversification strategies of firms is an issue largely overlooked in both the strategic management and international business literatures. This paper develops a theoretical framework to understand how industry globalization, foreign competition, and firm product diversification may influence a firm's choice of its degree and scope of international diversification. Utilizing a panel dataset of U.S. manufacturing firms for the period 1987–99, we provide the first empirical evidence that industry globalization and foreign‐based competition are statistically significant factors explaining the degree and scope of international diversification by U.S. firms. Copyright © 2007 John Wiley & Sons, Ltd.