Regional and Product Diversification and the Performance of Retail Multinationals

Despite the importance of geographic expansion in the services sector, few studies have analyzed the relationships between international diversification, product diversification and performance for services firms. Here we investigate whether and how firms in the retail-trade sector may benefit by spreading their boundaries within and across regional boundaries. Using a panel data set of 68 large European retailers from 19 countries for the period between 1997 and 2010, we find that intra-regional diversification has a horizontal S-curve relationship and interregional diversification has an S-curve relationship with firm performance. Moreover, the results show that unrelated product diversification has a negative moderating effect on the relationship between inter-regional diversification and firm performance. Overall, these results add support in the services sector for the three-stage paradigm of international diversification and performance.

Keywords: Retail firms, geographic diversification, product diversification, regional diversification, performance, S curve.