Network diversity and multinational enterprise performance (Japan)

Research on the relationship between the diversity of a firm's activities and its economic performance is of central interest to both practitioners and strategy scholars. Although this relationship has been studied for many years, important questions remain unanswered; this thesis addressed two of these issues. First, the role of interorganizational networks was included, an important dimension of corporate diversity not hitherto considered in empirical research. Second, this research examined whether the traditional concept of geographic diversity can and should be separated more precisely into the related elements of international asset dispersion and country environment diversity. Further, the analysis was based on a sample of Japanese firms, thus responding to the frequent call for research outside Western contexts. Finally, the focus of this study was on very large multinational enterprises (MNEs) given that these organizations are very influential in the international social, political, and economic arenas and yet are only dimly understood.; This thesis was carried out in two stages using different methods of data collection. The initial stage of data collection was through semi-structured interviews with eleven MNE senior managers to gain insights into the practical aspects of managing corporate diversity. The second stage of analysis was through a latent variable structural equation model as well as a regression of latent variable scores involving a cross-sectional sample of 580 very large MNEs derived from data that were aggregated from a 1999 survey of 13,529 Japanese foreign subsidiaries.; Several important empirical findings evolved from this research. It was found, for example, that the new concept of network diversity is an important element in the management of very large multinational firms. It was discovered that firms that follow focused strategies—either through internally-based growth with sparse interorganizational networks or through network-based growth within large and highly diverse networks—experience superior performance. On the other hand, the firms that implement a mix of these two approaches tend to experience inferior performance. This result provides a counterpoint to the widely-held theoretical view that a larger, more diverse network yields benefits to the firm. In addition, the traditional concept of geographic diversity was divided into the related concepts of international asset dispersion and country environment diversity. It was discovered that international asset dispersion has a positive and linear relationship with firm performance whereas the new concept of country environment diversity has a nonlinear relationship with firm performance; firms benefit from country environment diversity at lower levels but this positive effect reaches an inflection point after which negative returns result. These findings on geographic diversity provide a more complete explanation for the relationship between multinationality and firm performance.