The relationship between product and international diversification: the effects of short-run constraints and endogeneity

What is it about?

This paper demonstrates empirically that the growth rates of firms along two key strategic dimensions (product expansion and geographic expansion) are negatively correlated. The theoretical implication is that short run constraints play a key role in the theory of firm growth, confirming the intuition of scholars such as Penrose.

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Why is it important?

The implication for managers is that they would be well advised not to try to expand too rapidly along various directions simultaneously, even if they have opportunities and resources to exploit- unfettered growth will eventually undermine performance and be counterproductive.