This study contributes to international business literature by addressing the important issue of contextual boundaries to the effectiveness of differentiation strategies of industrial firms’ foreign units, notably wholly owned subsidiaries and co-operations. A model was tested using data from 166 foreign units of Swedish firms. For the first-tier boundary of price competition, a positive association was found between technology leadership and the unit’s performance. The association between market responsiveness and performance is strengthened if the firm is the sole owner of the unit and is able to fully control the strategy. For value-based competition, a positive association was found between market responsiveness and performance. Here, the second-tier boundary of market experience strengthens the association between technology leadership and performance. Contributions to literature are discussed.