Resource Allocation, Level of International Diversification, and Firm Performance

Read this introduction to a resource-based approach toward international business that highlights topics like transaction costs theory and analytical models.

Abstract

This paper investigates the threads between international diversification and firm performance, resource allocation to R&D and capital expenditure. The context of this study is a resource-based view and transaction costs theory. Firms that are going international, benefit from the resources available to them outside their home country as well as from the utilization of their core competencies in other countries. Regression models without interactive terms indicate that resource allocation significantly impacts firm performance. Capital expenditure is positively associated with return on assets, while research and development expenditure undermines the firm's performance. Analyses suggest that there is no thorough relation between international diversification and returns, regardless of using asset or sales diversification variables. The estimates of diversification variables are negative and insignificant in most models.

Keywords: International diversification, Return on assets, R&D expenditure, Capital expenditure

Source: Aziz Bakay, Ahmed Elkassabgi, and Murad Moqbel, http://www.ccsenet.org/journal/index.php/ijbm/article/download/9246/9366
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