Impact of Product Diversity and International Diversity on Performance in the Global Automotive Industry

This study examines the relationships between product diversity, international geographical diversity, and company financial performance in the global automotive industry. A sample of the top twenty global automobile manufacturers of 2012 is used to test the hypotheses. ROS has been employed as the performance indicator, while the number of countries in which a company has manufacturing facilities is an indicator of international geographical diversification. Two different measures have been employed as product diversity indicators – a simple model count, and a modified measure of the Herfindahl index. Also, the company’s age and size are used as control variables. According to the analysis of this study, product diversity has a positive and statistically significant impact on financial performance, but international diversity has a nonsignificant negative relationship with performance. This research also uncovers that international diversity has a positive association with product diversity, while the company’s age negatively affects performance and positively impacts product diversity. Keywords: Product Diversity, International Diversity, Financial Performance.