The Relationship between Degree of International Diversification and Financial Performance in Restaurant Service Industry: Evidence from U.S.

International diversification is a prevalent and strategically important strategy applied by numerous restaurant companies. According to previous research literature on the subject, researchers have contradictory perspectives regarding the effects of international diversification on company performance. That is while some argue that it has positive effects on company performance, others argue that it has negative impacts on it. This lack of consistent findings and inconclusive results might be due to potential methodological and theoretical causes. Being one of the most significant topics for research, international diversification-performance relationship has been extensively explored in strategic management literature. Nevertheless, a major void in the literature has been the scarcity of studies that have investigated the effect of international diversification on performance of restaurant companies and attempted to find the particular patterns of the relationships between these variables. Moreover, most of the previous studies that investigated this topic were based extensively on the sample of manufacturing companies or firms from various mixed industries. Based on the theories and distinct differences of restaurant companies this study argues that the form of the relationship between internationalization and performance is different from other industries. To accomplish research purposes, this study applied Pearson’s correlation and multiple regression analysis. The sample of this study consists of 45 U.S. based public multinational restaurant companies (MNRCs) with 204 observations over the period of 2008~2012. The outputs of the analysis are different from what they were expected. The results of this study indicate that international diversification has a negative linear relationship with restaurant company performance. Based on the findings, it is suggested that restaurant company managers need more elaborate and prudent decision making, when implementing international diversification strategy. It is strongly advised that managers of the U.S. MNRCs should conduct rigorous market research and not rush when making a decision to expand company operations internationally. The results of this study can be used not only for the further understanding and research by academicians, but also in practice by industry professionals.