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The purpose of this study is to examine the impact on firm performance of foreign concentration vs diversification strategies, as well as the moderating role played by market, product and firm characteristics.

Moderated regression analysis is used.

Distribution and cultural distance (CU) moderate the relationship between foreign concentration‐diversification and stock market performance; while the non‐repetitive character of product purchase moderates the relationship at an accounting performance level.

First, the lack of information prevented us from examining other groups of determining factors. Second, the possible existence of bias in the results due to the selection of stock market quoted firms.

Managers must realise that CU, distribution channel, and the product factor of non‐repeat purchase, play an important role in the choice of a concentration vs diversification strategy when explaining business results. Government authorities should develop training programmes for firms located in middle‐income countries in order to detect the CU with target markets, as well as the development of effective distribution channels and of product strategy in these markets.

The findings of this study and the implications proposed show the relevance of this topic. The paper focuses on a middle‐income country (Spain) and uses two measurements of firm performance: an accounting rate and a market measure based on the event‐study (excess returns on the stock market generated by the announcement of a foreign expansion).