Intra-regional Sales, Product Diversity, and Performance in Merchandising Multinationals

Department of Business Economics and Public Policy, Indiana University Kelley School of Business
02/2007; DOI: 10.1016/j.intman.2007.01.001
Source: RePEc

ABSTRACT This study examines the relationships between intra-regional sales, product diversity, and performance of 45 merchandising firms using data from 1997 - 2003. The interaction effects between product diversity and intra-regional sales on performance are explored, using a curvilinear relationship. The analysis integrates three main theories, namely the resource-based view, transaction costs, and organization learning theory. The models measuring a firm’s performance by return on assets (ROA) and return on sales (ROS) show that at high levels of intra-regional sales, small levels of product diversity can generate greater return to a firm but high levels of product diversity may hurt a firm’s performance. Higher levels of intra-regional sales tend to enhance the impact of product diversity on performance. The results are sensitive to the choice of performance measure.

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