International diversification and professional service firms

Abstract

This research considers factors related to the propensity of professional service firms to open foreign offices, and explores relationships between patterns in international diversification and firm performance. This is one of the first studies to consider how a firm's home location relates to patterns in diversification, and also contributes by relating specific strategic motives to operational definitions, and theorized links between diversification and performance. The results suggest that firm prestige, or status, is positively related to the ratio of foreign to total offices maintained, and home location is associated with patterns in diversification. Additionally, results suggest that international diversification to exploit existing firm resources, or diversification to pursue and develop new resources, are both associated with positive performance. However, the results also suggest that the simultaneous pursuit of both types of diversification may be associated with negative performance.