International diversification and firm performance in Mexican firms: A curvilinear relationship?

This study examines the relationship between international diversification strategies and performance in emerging market firms. Using a longitudinal sample of Mexican firms, it finds that there is a U-shaped curvilinear relationship between international diversification and firm performance. Mexican firms initially experience negative performance as they expand internationally due to the liability of foreignness; however, over time, through gaining experience and through organizational learning, they eventually reap the positive benefits from international expansion. Contrary to expectations, our study finds no support for geographic distance as a moderator of the international diversification-performance relationship. Managers of emerging market firms should exercise patience as they initially face challenges to international expansion and should consider expanding to a diverse set of destinations, including those that are more distant. (c) 2005 Elsevier Inc. All rights reserved.