International Diversification and Performance of Construction Companies: Moderating Effect of Regional, Product, and Industry Diversifications

Abstract

In today's competitive and complex construction market, construction companies must expand their business into international markets if they are to survive and remain competitive. To improve our understanding of whether international diversification can lead to better performance such as increasing profitability, facilitating growth, and achieving higher levels of market power, this study explored both linear and curvilinear forms of the relationship between international diversification and the performance of construction companies and investigates the moderating effect of regional, product, and industry diversifications. Regression analysis and moderated regression analysis were used to examine a data set comprising 72 listed international construction companies over the period 2009-2014. The results reveal a U-shaped relationship between international diversification and firm performance. Regional diversification has a negative moderating effect on the relationship, and both product diversification and industry diversification play positive roles in enhancing the performance effect of international diversification. These findings are expected to assist managers of construction companies making decisions on international diversification.