International Diversification and Performance: the Moderating Effect of Political Risk and Psychic Distance

There is plenty of evidence to suggest that companies in some parts of the world are increasingly diversifying the geographic scope of their business activities in the pursuit of competitive advantage. Although geographic expansion comes with a set of benefits, different phases of cost may diminish the performance benefits of internationalization. In this study, we extend geographic diversification research to a new context (Taiwanese-based) and tried to explore internationalization-performance relationship at difference expansion phases. We tested our new theoretical model with a longitudinal data set comprising 214 Taiwanese electronic industries during 2000 to 2007 periods. This sample captured Taiwanese electronic manufacturing substantially involved in internationalization activities and their relationship with performance, which was necessary to discover their different changes in our study. Further, the moderating effect of host countries? political risk and psychic distance are key variables that should not be underestimated.