1. ¹The Chinese University of Hong Kong, Hong Kong, PRC
2. ²York University, Canada
3. ³Hong Kong Baptist University, Hong Kong
4. ⁴Xiamen University, Xiamen, PRC

Correspondence: G Qian, Department of Management, Faculty of Business Administration, The Chinese University of Hong Kong, Shatin, N.T., Hong Kong, PRC. Tel: +852 2609 7827; Fax: +852 2603 5473; E-mail: qian@baf.msmail.cuhk.edu.hk

Received 13 March 2004; Revised 29 December 2006; Accepted 23 August 2007; Published online 10 January 2008.

Abstract

This study examines how regional diversification affects firm performance. The results indicate that regional diversification has linear and curvilinear effects on firm performance. Regional diversification enhances firm performance linearly up to a certain threshold, and then its impact becomes negative. The results also show that firms of developed countries maximize their performance when they operate across a moderate number of developed regions and a strictly limited number of developing regions. This explains why internationalization by most international firms is regional rather than global.