The determinants of firms’ global diversification decisions

Catalina Hurwitz, Wen-Hsiu Chou, Chun-Hao Chang and Arun Prakash

Applied Economics, 2019, vol. 51, issue 30, 3274-3292

Abstract: Why do some firms choose to be ‘born global’ and become early internationalizing firms (EIFs) while others choose to be ‘born-again global’ and develop into late internationalizing firms (LIFs)? What are the main factors impacting a firm’s decision on the timing of global diversification? Based on the theories of diversification, this study examines the role of peer influence and desire for growth on the timing of a firm’s globalization decision. We further study the idiosyncratic risk and the adoption of technological innovation hypotheses on global diversification. Our results document that innovation efficiency strongly enhances EIFs’ propensity to global diversification. On the other hand, peer pressure and idiosyncratic risk level significantly influence EIFs not to globalize. In contrast, LIFs are positively influenced by their industry peers, showing how young and mature companies respond to the market competition in a different manner.

Date: 2019
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DOI: 10.1080/00036846.2019.1566690

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