Contemporary Business Studies - Academy of Knowledge Process ...

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International Journal of Contemporary Business StudiesVol: 4, No: 2. February, 2013 ISSN 2156-7506Available online at http://www.akpinsight.webs.comModel of International DiversificationHofsted’sRanking1980NCDSCOREAbove 37NCDSCOREBetween19 to 36NCDSCORE1 to 18Diversification Zone 3Diversification Zone 2Diversification Zone 1International Diversification successCONCLUSIONThe controversy in diversification performance relationship is due to a hidden moderator in thisrelationship. That hidden moderator is national culture dimension, if its impact is included thiscontroversy will be resolved and we will find a clear diversification –performance relationship. Forplacing national culture as moderator between international diversification and performance we foundsupport of national identity theory, Social learning theory, international relation theory and socialexchange theory.On the basis of our propositions regarding national culture’s moderation effect we proposed ahypothetical model which talks about the cultural fit between the parent and subsidiary company. Ithighlights three diversification zones in which firms as per their national country has some hofsted score,Countries lying in same range of score are grouped in same zone and are favorable for diversificationwith each other. Our hypothetical model is dividing the world into cultural regions and now MNE’sshould look first that what is their cultural zone and which countries have the same cultural zone. With inthe zone diversification performance relationship will be positive and firms performance will be high andbetween the zones if firm diversify than diversification performance link will be negative and culturalshock will increase the post diversification integration cost of firm. Hence this cost will decrease theperformance of firm in international diversification. This hypothetical framework supports our notion ofplacing national culture dimension as a moderator between diversification and performance.2013©Academy of Knowledge Process96
International Journal of Contemporary Business StudiesVol: 4, No: 2. February, 2013 ISSN 2156-7506Available online at http://www.akpinsight.webs.comFUTURE RESEARCH IMPLICATIONSFor future researchers there is a wide area to study the international diversification and validate ourhypothetical model. Studying company’s diversification regions and their success failure ratio would be agood study to test our model.A longitudinal study can also be conducted to test our propositions by identifying firms with highinternational diversification exposure. Due to intensive criticism on hofsted’s national culture dimensionsa new study is required which can account the dimensions of GLOBE study and come up with newnational scores and that study will be landmark in validation of our hypothetical model.Our study has practical implications for top management of multinational companies involved ininternational diversification and it mitigates the risk of diversification failure in case of diversifying in asame zone identified by us.LIMITATIONS OF THE STUDY• Performance has been used as a measure of different outcomes; we included all those in ourumbrella of performance as a dependant variable that may affect the causality of our propositions.• We focused and limited the performance with the post diversification integration.• Its very difficult to comprehend and explain the all dimensions of culture and conclude as a wholethat national culture dimension moderated the relationship• We used hofsted score to support our hypothetical model which is widely criticized in literature.We don’t have any other score for reference so we proposed in our future research that a newvalid study is required which encounter the flaws in hofsted’s study and come up with newnational culture scores of the world.REFERENCESAdner, R. and Levinthal, D. (2001) 'Demand heterogeneity and technology evolution: implications forproduct and process innovation', Management Science 47: 611-628.Ansoff, I.H. (1965) Corporate Strategy: An Analytic Approach to Business Policy for Growth andExpansion, McGraw-Hill: New York.Aaker, D., ‘(1980).Marketing Research: Private and Public Sector Decisions, New York: Wiley,Andrews, K.R., (1980)The Concept of Corporate Strategy, Homewood, IL: Richard D. Irwin,.Berry, Charles H., Corporate Growth and Diversification, Princeton, NJ: Princeton University Press,1975.Buhner, R. (1987) 'Assessing international diversification of West German corporations', StrategicManagement Journal 8(1): 25-37.Barkema, H.G. and Vermeulen, F. (1997) 'What differences in the cultural backgrounds of partners aredetrimental for international joint ventures?', Journal of International Business Studies 28(4):845-864.Bartlett, C. A. (1986). Building and managing the transnational: The new organizational challenge. In M.E.Brock, D. M., Barry, D., & Thomas, D. C. (2000). Your forward is our reverse, your right, our wrong:Rethinking multinational planning processes in light of national culture. International BusinessReview, 9(6), 687–701.Bhide Amar, “Reversing Corporate Diversification,” in Donald H. Chew, Jr. (ed.), The New CorporateFinance: Where Theory Meets Practice, New York, NY: McGraw-Hill, Inc., 1993, pp. 526-537.Berger, P.L. and Luckmann, T. (1967) The Social Construction of Reality: A Treatise in the Sociology ofKnowledge, London: The Penguin Press.Bowman, E. H. (1982). ‘Risk seeking by troubled firms’, Sloan Management Review, 23, pp. 33–42.2013©Academy of Knowledge Process97
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