Product diversification has been a widely adopted firm strategy for growth in the global marketplace (Ravichandran et al. 2009). However, the research on the effects of product diversification on firm performance across various disciplines, such as marketing, strategic management, and finance, produces mixed results (e.g., Graham, Lemmon, and Wolf 2002; Soni, Lilien, and Wilson 1993). One stream of research that focuses on comparing financial performance of diversified American firms with that of specialized American firms demonstrates that product diversification leads to value discount, and diversified firms have significantly lower market value than single-segment firms (e.g., Berger and Ofek 1995; Lang and Stulz 1994). In contrast, another stream of research suggests that diversification contributes to firm survival and long-term performance (e.g., Chiang 2010). Furthermore, studies of the product diversification-performance link have been centered on American firms, and few studies have explored the impact of product diversification on firm performance with more diverse international backgrounds (Lins and Servaes 1999). The advance of globalization makes product diversification an even more prominent marketing strategic initiative across firms worldwide. How product diversification impacts firm performance under various social and economic globalization forces is an intriguing question for not only the practitioners but also the academicians (Wiersema and Bowen 2008).
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