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International Journal of Contemporary Business StudiesVol: 4, No: 2. February, 2013 ISSN 2156-7506Available online at http://www.akpinsight.webs.comNational Culture as a Moderator betweenInternational Diversification Strategy andPerformanceFarooq Ahmed JamPhD(Scholar) in Management, International Islamic University, IslamabadImran SaeedPhD(Scholar) in Management, International Islamic University, IslamabadAtif UllahPhD (Scholar) in Management, Qurutaba University, PeshawarMuhammad ArifLecturer in IBMS, UOA, PeshawarHina GulLecturer in IBMS, UOA, PeshawarPakistanABSTRACTLiterature on International diversification strategy (IDS) and performance has beenreviewed to support their established link .Also literature on national culture dimensionsand its impact on international diversification performance has be reviewed to find astrong support for placement national culture dimension(NCD) as a moderator betweenIDS and firm performance. We gave our propositions placing NCD as moderator andgiven a hypothetical model of international diversification that divides the world intothree diversification zones .Model talks about the similar cultural characteristics for allcountries within the zone and different cultural characteristics countries between zones.This cultural fit in a same diversification zone tend to decrease integration cost and henceenhance the firm performance in case of international diversification. Our model supportsthe moderation effect of national culture in IDS and performance. Future researchimplications are given.INTRODUCTIONLarge renowned scholars in the field of internationalization claim that by neglecting the costs ofinternationalizations inquires would explain vague results. (Gomes and Ramaswamy 1999; Hitt,Hoskisson and Kim, 1997).The studies conducted in 1980’s start discussing the benefits as well as costsof international strategies. Which include international diversification, merger and acquisition decisions.In early 1990’s both benefits costs and mutual affect was discussed by the researchers. Costs ofdiversification include the costs associated post diversification integration which determines the successor failure of the diversification decision and performance of firm is directly linked with that integrationcosts.That cost increases as there is a cultural mismatch between the firms diversifying. When national cultureof a parent and subsidiary company is different that will increase the integration costs for firms due tocultural shock and resistance to adaptability with the firms of different national culture. Same like thatwhen there is a cultural fit in a sense that both parent and subsidiary firms have same national culture thatwill tend to decrease the costs associated with integration and hence is the cause for enhanced firmperformance in case of international diversification. This idea motivated us to study the internationaldiversification strategy literature, placing performance as dependant variable in the study. We2013©Academy of Knowledge Process87