Product Diversification and Market Value of Large International Firms: A Macroenvironmental Perspective

• Published in: Journal of international marketing (East Lansing, Mich.) Mich.), 2014-01, Vol.22 (4), p.86-107
• Main Author: Qiu, Tianjiao
• Format: Article
• Language: English
• ISSN: 1069-031X; 1547-7215
• DOI: 10.1509/jim.14.0049

Drawing on a strategic fit perspective in international marketing, this study explores how macroenvironmental factors—cultural dimensions and globalization forces—affect the relationship between product diversification and market value of large international firms. The author hypothesizes that (1) the four dimensions of culture (individualismcollectivism, uncertainty avoidance, power distance, and masculinity-femininity) significantly affect product diversification and (2) economic and social globalization positively moderate the relationship between product diversification and market value of large international firms. The author empirically examines the hypothesized relationships using a sample of 485 firm-year observations from 17 countries for the period between 2006 and 2009. Using the hierarchical linear modeling technique, the author demonstrates that firms in countries with cultures characterized by high uncertainty avoidance and low power distance have a higher degree of product diversification, and product diversification in turn has a significant positive impact on firm market value. Furthermore, the author demonstrates that economic and social globalization, as indicated by actual flows, personal contacts, and information flows, positively moderates the relationship between product diversification and market value of large international firms.