International diversification is important to both individual and corporate investors, as it provides an opportunity for optimising returns for the same level of risk. Given the diversity in the performance of economies across continents, internationalisation provides prospects for the diversification of risk since the lower the correlation in performance, the better the chance for a successful diversification of risk. However, international diversification, which is a consequence of internationalisation, does not often happen as expected due to the development of regionalisation, as shown by the increase in regional trading blocs. With regionalisation, investors tend to be influenced by the geographic convenience when making investment decisions over other considerations. Internationalisation has also been found to create unfair advantages where companies, especially from developed countries, enjoy subsidies and protection through tariffs. As a consequence, there have been strong protests against the activities of international organisations such as the WTO, G8 and the World Bank due to feelings in some quarters that globalisation and internationalisation are harmful to economic development of developing countries.
Tebogo, B. (2011). Is International Investment Diversification Prudent to Either the Individual or Corporate Investor? SSRN. https://doi.org/10.2139/ssrn.1893724