The relationship between international diversification and performance in service firms

international diversification is a growth strategy that has a major potential impact on firm performance. The relationship between international diversification and firm performance has been extensively studied in the international strategy literature. A major gap in the literature has been the non-existence of studies that have examined the effect of international diversification on performance in service firms. Previous studies that have tested the international diversification-performance relationship were based on samples of manufacturing firms. We argue that the form of the relationship between multinationality and performance is different in service firms. We provide a theoretical argument for this claim and hypothesize that there is a U-shaped curvilinear relationship between multinationality and performance in service firms. Our sample consists of 81 major German service firms, spanning across four industries. Results show that there is support for a U-shaped curvilinear relationship. Based on the findings, implications and directions for future research are provided.