Intra-regional sales, product diversity, and the performance of merchandising multinationals

This study examines the relationship between intra-regional sales, product diversity, and performance of 45 merchandising firms using data from 1997 to 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 improve a firm's performance and enhance the impact of product diversity on performance.