Cultural Diversity and Firm Performance

CULTURAL DIVERSITY AND FIRM PERFORMANCE The international business literary works suggests several reasons why global diversification and firm murder should be positively related. First, markets are not perfectly integrated, thus booking in more than one nationalm arkets ervest o balanceo ut regionalm acroeconomict rendst hat are slight than perfectly correlated. As a result, MNEs should experience greater market performance since investors recognize and reward performance stability[ Shaked1 986].R elatedly,g reaters preada crossi nternationalm arkets reducest he risk profileo f the unionso verallp ortfolio of businessu nits, which in turn should have a salutary force play on corporate performance [Caves 1982; Rugman 1979]. Second, international diversification whitethorn yield cost advantages by allowing the firm to expand in its commonwealth of distinctive competence and boost production economies without resorting to product diversification [Buhner 1987; Hirsch 1976]. This also allows cross-subsidization among markets [Ohmae 1989a,b]. Third, market imperfectiotheory suggests that multinationals can exploit their home monopoly advantage( e.g., intangible,f irm-specifica ssets such as technologya nd brand name recognition) by increasing their international bearing [Palich 1994].

Finally,i nternationald iversificationc an boost marketp ower by allowingt he firmt o arbitraget ax regimes[ Agmona nd Lessard1 977;L essard1 979],o btain more accuratee nvironmentailn formation[ Vernon1 979],a nd raiseb arrierst o entry [Palepu 1985]. The hypothesist hat internationadl iversificationa nd firmp erformances hould be positively related has been tested in numerous ways such as tracking company performance longitudinally as global expansion occurs (e.g., Smith and Zeithaml [1993]), comparing the performance of two or more groups of firms differing in their international involvement (e.g., Michel and Shaked [1986]), and examining the regression do of... If you want to get a full essay, order it on our website: Ordercustompaper.com

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