The concepts of geographic diversification and firm performance are central to the study of corporate strategy in a world economy. This research aims at establishing the nature of the relationship between the two variables, with the moderating effect of intangible assets including research and development and advertising intensity. Using a robust dataset of 2,067 firms, we tested two hypotheses: first, that the relationship is curvilinear, conforming to an S-shape, and second, that the presence of high intangible assets improves the performance return from geographic dispersion. These results indicate that both low and high amounts of geographic diversification are detrimental to firm performance; however, moderate levels of geographic diversification produce marked enhancements in ROA and Tobin’s Q. Consequently, when internationalization is low, the performance decreases to 0.35 below the base level in Tobin’s Q; and moderate internationalization of up to 0.2 leads to a high increment of 0.501 in Tobin’s Q, which is 40% improvement. However, if the level of internationalization goes beyond this threshold, the link between the extent of performance and internationalization is negative. The interaction effects reveal that internationalization increases the performance of firms with greater advertising and R&D intensities by 20% when advertising intensity increases from 2% to 4% at an internationalization level of 0.7 of Tobin’s Q.
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Bwanbale Kaikara
Bwanbale Kaikara
Master of Business administration, Uganda Management Institute, Jinja Road, P.O Box 20131 Kampala, Uganda.
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Bwanbale Kaikara and Akiki Mukasa, “Nonlinear Effects of Geographic Diversification on Firm Performance with the Moderating Influence of Intangible Assets”, Journal of Enterprise and Business Intelligence, vol.4, no.3, pp. 137-145, July 2024. doi: 10.53759/5181/JEBI202404014.
