International diversification and the market value of new product introduction

Chi-Feng Wang, Li-Yu Chen and Shao-Chi Chang

Journal of International Management, 2011, vol. 17, issue 4, 333-347

Abstract: Although previous studies on international diversification are plentiful, they mainly focus on the effect of international diversification on overall firm performance, and the results are mixed. This study extends this line of research and explores the impact of international diversification on new product performance. Specifically, we ask if international diversification explains the stock market reactions to new product introduction (NPI) announcements. We find an inverted-U-shaped relationship between international diversification and the announcement returns of NPIs, revealing that the market value of NPIs initially improves and then declines with increasing international diversification. The results also show that intangible assets, such as technological and marketing capabilities, positively moderate the relationship between international diversification and the market value of NPIs. Our study not only highlights the importance of considering both sides of international diversification in affecting investors' assessments of corporate new product strategies, but also shows the possibility of internal capabilities in changing the fixed relationship between international diversification and the market value of new products.

Keywords: International diversification; New product introduction; Technological capability; Marketing capability; Event study (search for similar items in EconPapers)
Date: 2011
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Citations: View citations in EconPapers (12)

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DOI: 10.1016/j.intman.2011.03.002

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