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A Tale of Two Concepts: Exploring the Relationship between Firm Performance and Multinationality
Uppsala University, Disciplinary Domain of Humanities and Social Sciences, Faculty of Social Sciences, Department of Business Studies.ORCID iD: 0000-0003-0845-4499
2022 (English)Doctoral thesis, comprehensive summary (Other academic)
Abstract [en]

Despite being a pivotal topic over the past 50 years, the benefits and costs of internationalization are not well understood. A substantial body of research in international business, strategy, and general management is devoted to understanding firm internationalization and its connection to a firm’s financial performance; however, results are inconclusive.

This thesis explores firm performance in relation to internationalization processes and, consequently, a firm’s degree of multinationality. The aim is to critically assess the extant literature, evaluate prevailing underlying assumptions, and investigate the causal direction between the two key concepts: firm performance and multinationality. A sequential, multiphase research approach divides the research process into three consecutive phases – exploratory, confirmatory, and explicatory – allowing for a combination of methods, including a systematic literature review, fixed effects logistic regression on 13 years of unbalanced panel data, curvilinear OLS regression on panel data, and content analysis of pilot case studies. Together, this provides a holistic response to the research question: What role does firm performance play in relation to multinationality?

Findings reveal a paradigmatic bias in previous research, where authors propagate the ubiquitous causal assumption that multinationality affects firm performance. Instead, this thesis finds solid statistical support for a reversed causal relationship – firm performance drives multinationality. The theoretical arguments are derived from behavioral theories, including the resource-based view, the internationalization process model, and prospect theory. This thesis bridges organizational-level with individual-level theories, contributing to the discussion on managerial decision-making in the internationalization process.

Place, publisher, year, edition, pages
Uppsala: Department of Business Studies , 2022. , p. 78
Series
Doctoral thesis / Företagsekonomiska institutionen, Uppsala universitet, ISSN 1103-8454 ; 216
Keywords [en]
multinationality, firm performance, paradigmatic bias, performance-multinationality relationship, resource-based view, prospect theory, internationalization process model
National Category
Business Administration
Research subject
Business Studies
Identifiers
URN: urn:nbn:se:uu:diva-481640ISBN: 978-91-506-2965-1 (print)OAI: oai:DiVA.org:uu-481640DiVA, id: diva2:1687154
Public defence
2022-09-30, Hörsal 2, Ekonomikum, Kyrkogårdsgatan 10, Uppsala, 10:15 (English)
Opponent
Supervisors
Available from: 2022-09-07 Created: 2022-08-13 Last updated: 2022-10-04
List of papers
1. Patterns of Inconsistency: A Literature Review of Empirical Studies on the Multinationality–Performance Relationship
Open this publication in new window or tab >>Patterns of Inconsistency: A Literature Review of Empirical Studies on the Multinationality–Performance Relationship
2023 (English)In: Critical Perspectives on International Business, ISSN 1742-2043, E-ISSN 1758-6062, Vol. 19, no 2, p. 253-298Article, review/survey (Refereed) Published
Abstract [en]

Purpose: This study aims to understand the performance implications of when a business internationalizes. Many managers take the performance implications of internationalization for granted. Whether seeking a broader customer base or cost reduction through cross-border outsourcing, the overwhelming belief is that internationalization leads to higher profits.

Design/methodology/approach: This paper offers a systematic review, content analysis and cross-tabulation analysis of 115 empirical studies from over 40 major journals in management, strategy and international business between 1977 and 2021. Focusing on research settings, sample characteristics, underlying theoretical approaches, measurements of key variables and moderators influencing the multinationality and performance relationship, this study offers a detailed account of definitions and effects.

Findings: The findings of this study suggest a tenuous connection between internationalization and performance. No strain of research literature conclusively identifies a consistent direct path from internationalization to performance. The context specificity of the relationship makes general declarations impossible.

Research limitations/implications: Future researchers should recognize that internationalization is a process taking different forms, with no specific dominant form. General declarations are misleading. The focus should be on the process of internationalization rather than on the outcome.

Originality/value: This study contributes to the international business literature by exploring reasons for the inconsistent results and lack of consensus. Through a detailed account of definitions and effects, this paper explores the lack of consensus as well as the identified shapes of the relationship.

Place, publisher, year, edition, pages
Emerald Group Publishing Limited, 2023
Keywords
Literature review, Internationalization, Multinationality, Context, Performance, Geographic diversification, Moderators
National Category
Business Administration
Research subject
Business Studies
Identifiers
urn:nbn:se:uu:diva-481636 (URN)10.1108/cpoib-06-2021-0051 (DOI)000821375900001 ()
Funder
The Jan Wallander and Tom Hedelius Foundation, P2013-0344:1
Available from: 2022-08-13 Created: 2022-08-13 Last updated: 2024-07-02Bibliographically approved
2. International Activities and Corporate Performance in Founder-Controlled Firms
Open this publication in new window or tab >>International Activities and Corporate Performance in Founder-Controlled Firms
(English)Manuscript (preprint) (Other academic)
Abstract [en]

Firms controlled by their founders are interesting because of a preference for control, cautiousness, and survival. In addition, several previous studies suggest that founder-controlled firms perform better than do other firms. We use unique hand-collected data from 2,055 firm-year observations to study the associations between internationalization activities and company performance. We confirm that founder-controlled firms perform better and that they are less internationalized. There is a plethora of evidence that these firms make more cautious internationalization decisions. However, as they become more internationalized, they perform better. The data support, e.g., the Uppsala internationalization model, which suggests a gradual internationalization strategy. It also supports finance research, suggesting that large acquisitions create little value. It is possible that cautious internationalization strategies based on organic growth work better.

Keywords
Founder-controlled firms, international activities, foreign sales, geographic diversification, foreign acquisitions, performance
National Category
Business Administration
Research subject
Business Studies
Identifiers
urn:nbn:se:uu:diva-481637 (URN)
Funder
The Jan Wallander and Tom Hedelius Foundation, P2013-0344:1
Available from: 2022-08-13 Created: 2022-08-13 Last updated: 2022-08-13
3. Turning the Tables: The Relationship Between Performance and Multinationality
Open this publication in new window or tab >>Turning the Tables: The Relationship Between Performance and Multinationality
2022 (English)In: MIR: Management International Review, ISSN 0938-8249, E-ISSN 1861-8901, Vol. 62, no 1, p. 3-26Article in journal (Refereed) Published
Abstract [en]

The abundant research on the multinationality-performance relationship has yet to provide cohesive findings concerning the nature and shape of the relationship. This paper joins a small, but growing body of research considering the effect of performance on multinationality. Drawing on resource-based theory and prospect theory, the authors develop competing hypotheses for the impact of performance on multinationality. Using non-linear ordinary least squares regression on unbalanced panel data for 2066 firm-year observations of Swedish publicly listed firms over 12 years, the authors find strong support for a positive U-shaped relationship. The foremost contribution is that performance drives internationalization, much more than vice versa. The model for the traditional causal direction from multinationality to performance explains less than half the variance, has marginal significance on key variables, and has an illogical outcome. Another contribution is how risk-taking attitudes, in accordance with prospect theory, explain a high level of internationalization when performance is negative. As performance rises towards zero, internationalization drops to an inflection point, where in accordance with resource-based theory, the degree of internationalization begins rising. This debunks the prevalent view that internationalization is contingent upon positive performance and abundant resources.

Place, publisher, year, edition, pages
Springer Nature, 2022
Keywords
Performance, Multinationality, Internationalization, Prospect theory, Resource-based view
National Category
Business Administration
Identifiers
urn:nbn:se:uu:diva-472192 (URN)10.1007/s11575-022-00464-3 (DOI)000779053000003 ()
Funder
The Jan Wallander and Tom Hedelius Foundation, P2013-0344:1
Available from: 2022-04-07 Created: 2022-04-07 Last updated: 2022-09-14Bibliographically approved
4. Reversing Tradition: The Impact of Performance on Internationalization Decisions in South Korea and Canada
Open this publication in new window or tab >>Reversing Tradition: The Impact of Performance on Internationalization Decisions in South Korea and Canada
(English)Manuscript (preprint) (Other academic)
Abstract [en]

The purpose of this paper is to advance a theoretical model based on two case studies that show how the performance of an organization influences its internationalization decisions, and which highlight the moderating impact that both market orientation and entrepreneurial orientation can have on the relationship between performance and internationalization. We conducted in-depth, semi-structured interviews with senior managers of two firms at two locations in the Asia-Pacific region. We conclude that the investigation of these unknowns provides insights that organizations can use in the long-term planning of business ventures and, as we saw in the case studies, short-term planning as well. The idea that performance can influence internationalization decisions of SMEs is atypical in the field of international business because it demonstrates the reverse of the more frequently studied impact of internationalization on performance.

Keywords
Internationalization, Performance, Strategic Orientation, Resource-Based View, Prospect Theory
National Category
Business Administration
Research subject
Business Studies
Identifiers
urn:nbn:se:uu:diva-481638 (URN)
Funder
The Jan Wallander and Tom Hedelius Foundation, P2013-0344:1
Available from: 2022-08-13 Created: 2022-08-13 Last updated: 2022-08-13

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