International Contraction for the Sake of International Expansion

We present novel theoretical arguments suggesting that the contraction of international market presence does not only allow firms to expand their presence into new business domains, but also to resume their international market presence in the long term. We argue that when firms contract their international market presence, they spark two subsequent processes: First, they free up non-scale free financial resources that become available for expanding into new business domains. Subsequently, such expansion creates new scale free technological knowledge resources that facilitate renewed international expansion. We find support for the existence of this novel growth trajectory in an analysis of changes in the international market presence and business segment presence of an extensive sample of public US-based firms between 1997 and 2019.