Stephen Davies, Laura Rondi and Alessandro Sembenelli

"Are multinationality and diversification complementary or substitute strategies? An empirical analysis on leading European firms?"
JEL codes: L1, L2
Keywords: multinationals, diversification, corporate structure, proprietary assets

Abstract: This paper models the multinationality and diversifcation of firms jointly. It applies a new typology, distinguishing diversification at home and abroad (multinationality in primary/secondary indsutries), to the corporate structures of a sample of dealding EU manufacturing firms. This provides the framewrok for a sequential stochastic model of firms' decision making. Results suggest that multinationality and diversification are, in general, complementary straegies. In differentiated-product industries, this implies that proprietary assets are a public good within the firm. In homogeneous-product industries, however, there is some evidence of substitutability, in that the two strategies may be alternative routes for escaping constraints on growth.

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