International Diversification: A ‘Quick Fix’ for Better Company Performance?
University of Auckland Business Review, 9(1): 17-23, 2007.
11 Pages Posted: 24 May 2019
Date Written: 2007
Abstract
The remoteness and relative size of New Zealand and Australia’s domestic markets often compound performance pressures, making it imperative for companies to diversify internationally.
Using a sample of 152 listed companies in New Zealand and Australia, this study finds that those companies that have diversified beyond the Australasia region to a larger extent have actually performed better than those that diversify mainly regionally and those that do not diversify. In addition, the analyses also show that prior performance of a company is a key determinant of international diversification efforts, except in the case of regional international diversification. That is, poor performance constrains a company’s ability to diversify internationally, except to neighbouring countries. These findings challenge the practices of using international diversification as a ‘quick fix’ for companies facing performance pressures and the effectiveness of diversifying into regional markets on the presumption of cultural and geographical proximity.
Keywords: International Trade, Management, Diversification in Industry, Economic Aspects, Business
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