Strategic Management Journal Strat. Mgmt. J., 24: 1289–1306 (2003) Published online in Wiley InterScience (www.interscience.wiley.com). DOI: 10.1002/smj.357 GEOGRAPHIC SCOPE AND MULTINATIONAL ENTERPRISE PERFORMANCE ANTHONY GOERZEN 1 * and PAUL W. BEAMISH 2 1 Faculty of Business, University of Victoria, Victoria, British Columbia, Canada 2 Richard Ivey School of Business, University of Western Ontario, London, Ontario, Canada Through an internalization theory lens, an argument is developed to suggest that the traditional concept of geographic scope should be split into two related, but more precise, elements of international asset dispersion and country environment diversity. Subsequently, these new concepts are tested using a structural equation modeling approach on a sample of 580 large multinational enterprises (MNEs). We find that the relationship between economic performance and international asset dispersion is positive, but that country environment diversity is negatively associated with performance, with a positive interaction between them. This study adds to our theoretical understanding of MNEs, and also provides a bridge between the mixed findings of prior research on multinationality by disentangling the unique effects of the latent subcomponents of geographic scope on firm performance. Copyright  2003 John Wiley & Sons, Ltd. The decision of where to locate productive assets is a key element of a firm’s international strategy. As a result, the concept of geographic scope has become important in the study of MNEs. While a great deal is known about the outcomes of internationalization, research has reported mixed findings on the relationship between geographic scope and firm performance. This study, therefore, was designed to address this question as it is of great interest to both international business scholars as well as to managers responsible for the strategic guidance of their multinational firms. Since prior research has tended to treat the con- cept of geographic scope as though it were uni- dimensional, this study is an attempt to provide a bridge between the varied results of prior empiri- cal work by unpacking this traditional concept into the separate, but distinct, elements of international Key words: multinational enterprise; geographic scope; internalization theory *Correspondence to: Anthony Goerzen, Faculty of Business, University of Victoria, Room 216, PO Box 1700, STN CSC, Victoria, BC, Canada V8W 2Y2. asset dispersion (i.e., the extent to which the MNE’s assets are spread across foreign coun- tries) and country environment diversity (i.e., the range in political, economic, and cultural differ- ences among the MNE’s foreign operations). The theoretical contribution of this research is to exam- ine the ways in which geographic scope is asso- ciated with firm performance. Given that this is a measurement issue as well as a theoretical ques- tion, this study also provides a strong statistical test to determine whether the theoretical dissec- tion of geographic scope into its two components is empirically useful. Using these new constructs, hypotheses on the relationship between geographic scope and economic performance are derived and tested using a structural equation model on a sam- ple of 580 large MNEs. LITERATURE REVIEW The relationship between geographic scope and the economic performance of MNEs has been Copyright  2003 John Wiley & Sons, Ltd. Received 26 July 2002 Final revision received 27 May 2003