A systematic review of the relationship between international diversification and innovation: A firm-level perspective

We conduct a systematic review of the relationship between international diversification (ID) and firm-level innovation (I), considering articles published between 1989 and 2020. The relationship between international diversification and innovation strategies is dynamic and complex, and recent evidence challenges the traditional notion that upgrading firm-specific advantages through technological innovation can be sufficient to guarantee international firm growth and performance. We develop a unified framework that integrates findings from extant ID-I research while also proposing new avenues for further research on topics such as: how firms deal with potentially conflicting ID-I goals, how underlying firm motives shape the interactions between these goals, and how new technologies and institutional dynamism increasingly influence the ID-I relationship. We also discuss how and why the new contexts in which decisions are made, together with the prevalence of relatively newer types of firms (e.g., those associated with global value chains, latest wave of emerging market multinationals, digitalized service MNEs), require a more modern conceptualization of the ID-I relationship.