International diversification, industrial diversification and firm performance of Hong Kong MNCs

Although multinational corporations (MNCs) are not new to business research, Asian MNCs and their performance have yet to be widely studied. This study investigates the relationship between international diversification, industrial diversification and firm performance of MNCs from Hong Kong. In contrast to previous findings, the results show that Hong Kong MNCs are more internationally diversified, but do not perform better, than domestic firms. Also, among Hong Kong MNCs, international diversification has a positive impact on profitability stability and sales growth, but not on profitability. Industrial diversification also enhances profitability stability but reduces profitability significantly. Neither the hypothesized inverted U-shaped relationship between international diversification and performance nor the interaction effect from both international and industrial diversification strategies on performance can be validated. Implications are discussed with reference to the local context. © 1998 BY JOHN WILEY & SONS (ASIA) LTD.