Internationalization vs. Business Diversification - The Impact of Internal Capability development

While both internationalization and product diversification are associated with firm growth, the choice between these two growth strategies has remained relatively under-researched. In this paper we assert that the development of specific capabilities result in dominancy of one growth strategy over the other. Hence, we expect firms to choose either internationalization or product diversification as their dominant growth path rather than pursuing both strategies. Moreover the choice of a dominant growth strategy is expected to lead to superior performance compared to pursuing both or neither growth strategies. Empirical analyses of the extent and process of internationalization and product diversification of leading Food & Beverage MNEs during the period 1996-2000 mostly support these expectations.