There have been numerous studies that have examined the relationships between international diversification, product diversification, firm resources, and performance. However, these studies have largely ignored the interrelationships and the causal linkages among the variables in consideration It was the purpose of this study, to overcome these limitations and to provide a better understanding of how these variables are related to each other. We have studied a sample of 211 firms for a 6-year period between 1995-2000. The results of the analyses have provided some interesting results. First, international diversification has been found to have a positive effect on innovation assets rather than the other way around. Second, the results show innovation assets lead to higher performance with a time lag. Further, there is also support that firms with little or no product diversification are more likely to benefit from international diversification. Finally, product diversification has been found to lead to lower investments in innovation assets.
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