The international diversification-performance link in Spain: Does firm size really matter?

• This study examines the international diversification-performance relationship in Spain.
• The sample consists of small, medium and large firms over the 1994–2008 period.
• The results confirm the existence of a horizontal-S curve for the full sample of firms.
• The nature and shape of the relationship is different in small, medium and large firms.
• Size is a key factor for identifying each type of firm's stage of international expansion.

This study provides new insights into the link between international diversification and firm performance in a sample of large manufacturing firms and SMEs based in Spain for the 1994–2008 period. Specifically, the focus is on how the nature and shape of this relationship may vary over time with firm size. The results show the existence of a horizontal-S curve when the whole sample of firms is considered in the empirical analysis. However, major differences are found between SMEs and large firms, and even within the actual group of SMEs. Strong support is found in large firms for the existence of a horizontal-S curve. Within the group of SMEs, there are small firms with a linear and negative relationship, whereas medium-sized firms record a U-shaped form. These findings suggest that as the international diversification-performance link is size-dependent, future research should explicitly consider firm size in order to better understand the nature of this relationship.