Foreign-based competition and corporate diversification strategy
By: BOWEN, Harry P
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Contributor(s): WIERSEMA, Margarethe F.
Material type: 
ArticlePublisher: UK : Wiley, December 2005Subject(s): Foreign competition | Diversification | Corporate strategyStrategic Management Journal 26, 12, p. 1153-1171Abstract: Since the mid-1980s U.S. domestic firms have faced significant increases in foreign-based (i.e., import) competition as reductions in barriers to international commerce have resulted in markets and industries becoming increasingly global. Despite the growing and widespread importance of foreign-based competition, the influence that such competition may exert on corporate diversification strategy is a question largely overlooked in the strategic management literature. This paper examines the impact of foreign-based competition in a firm's core business on both the level and nature of a firm's diversification strategy at the corporate level in a panel dataset of U.S. firms over the period 1985-94. Our findings provide the first evidence that increased foreign-based competition is indeed a statistically significant factor explaining both the reduced business-level diversity and the increased strategic focus of U.S. firms that has been widely perceived over the past two decades.
Since the mid-1980s U.S. domestic firms have faced significant increases in foreign-based (i.e., import) competition as reductions in barriers to international commerce have resulted in markets and industries becoming increasingly global. Despite the growing and widespread importance of foreign-based competition, the influence that such competition may exert on corporate diversification strategy is a question largely overlooked in the strategic management literature. This paper examines the impact of foreign-based competition in a firm's core business on both the level and nature of a firm's diversification strategy at the corporate level in a panel dataset of U.S. firms over the period 1985-94. Our findings provide the first evidence that increased foreign-based competition is indeed a statistically significant factor explaining both the reduced business-level diversity and the increased strategic focus of U.S. firms that has been widely perceived over the past two decades.
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