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ABSTRACT
This research analyzes the drivers of firm growth strategies and the relationship between internationalization and diversification based on the longitudinal study of the Volkswagen Group from 1937 until 2007. The study shows that firm resources, the needs of consumers, and the needs of the business all influence choices of growth strategies. The study also shows that internationalization need not be at the expense of diversification. Indeed, it seems to be an inevitable decision to internationalize and at the same diversify the range of offered products in order to avoid failure in the turbulent, investment-intensive automotive industry.
Introduction
The resource-based view (RBV) argues that the firm's Inherited' resources are its source of competitive advantage and thus provide the basis for its growth strategies (Barney, 1991; Penrose, 1959; Pitelis and Wahl, 1998). According to RBV, the growth strategy of the firm should balance exploitation of existing resources and development of new ones in adapting to the needs of changing environments (Teece, Pisano, and Shuen, 1997; Wernerfelt, 1984). Recent studies suggest increasing internationalization in the firm's core strategic business area (SBA) in return for divesting of assets in non-core SBAs (see Bengtsson, 2000; Gabrielsson and Gabrielsson, 2004; Meyer, 2006). The rationale behind this observation is that divestitures provide slack resources needed for internationalization in the core SBA.
This research asks whether there are other drives than 'inherent' resources behind managers' choices of growth strategies and also investigates the relationship between internationalization and diversification. Such analysis is relevant because firm growth bears risks, and attempting growth without a theoretical understanding of growth strategies may result in failure. The applied methodology is longitudinal case study. The case firm is the Volkswagen Group (VW), the leading car manufacturer in Europe. The case was selected intentionally from the automotive industry because this is a representative industry for many manufacturing industries, i.e. the industry of industries (Drucker, 1946). The studied time frame starts from 1937, the year of the firm's establishment, and ends in 2007.
Internationalization refers to increase in involvement in international operations which can be outward or inward (Welch and Luostarinen, 1988). It is a given fact that firms operate in a number of SBAs, and there are varying degrees of internationalization in each SBA. In this research...