Understanding Drivers of Risk‐Adjusted Performance for Service Firms with International Operations*

This article investigates whether international operations of service firms increase performance while reducing risk. The article draws on a longitudinal dataset of 584 internationally operating service firms from the United States. Analysis indicates that international diversification is negatively related to risk‐adjusted performance. However, it is established that international diversification interacts with internationalization and positively influences risk‐adjusted performance. This finding offers significant promise for firms, as it indicates that international operations (if managed well), through exposure to varied foreign markets coupled with adequate global scope, can lead to firms’ increased risk‐adjusted performance. The results provide a mechanism for decision‐makers to better understand international operations of service firms and present a strategy for achieving success in international markets by effectively managing two important levers: internationalization and international market diversification.