A 21-Year Review of Research on the Effect of Internationalization on Firm Financial Performance and Research Agenda
Main Article Content
Abstract
The objective of this paper is to review the effect of internationalization on firm financial performance and to propose a research agenda in the international business field. By systematically searching the relevant database, twenty-five related studies published in journals indexed in the Web of Science - Clarivate Analytics and Scopus in the period from 1998 to 2019 - were selected and reviewed. The study applied the meta-analysis method to detect the limitations of prior studies. Reviewing results reveal that most of the empirical studies concluded the positive effect of firms’ internationalization on their financial performance; while the nonlinear (U-shaped, or inverted U-shaped or S-shaped) relationship was confirmed by others. Building upon such research gaps, the study proposes research model for such a relationship and the moderating role of state ownership and CEO duality on the association to improve the robustness of future studies in the field
by integration.
Keywords:
Internationalization, performance, firms.
References
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https://doi.org/10.1057/palgrave.jibs.8400003
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https://doi.org/10.1057/palgrave.jibs.8400398
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https://doi.org/10.1057/palgrave.jibs.8490676
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https://doi.org/10.1111/j.1467-6486.1975.tb00514.x
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https://doi.org/10.1016/j.intman.2010.12.004
[26] J.W. Lu, P.W. Beamish, The internationalization and performance of SMEs, Strategic Management Journal, 22 (6–7), (2001) 565–586.
https://doi.org/10.1002/smj.184
[27] V. Marano, J.L. Arregle, M.A. Hitt, E. Spadafora, M. van Essen, Home Country Institutions and the Internationalization-Performance Relationship: A Meta-Analytic Review, Journal of Management, 42 (5) (2016) 1075–1110.
https://doi.org/10.1177/0149206315624963
[28] S.R. Miller, D. Lavie, A. Delios, International intensity, diversity, and distance: Unpacking the internationalization-performance relationship, International Business Review, 25 (4) (2016) 907–920.
https://doi.org/10.1016/j.ibusrev.2015.12.003
[29] N. Pangarkar, Internationalization and performance of small- and medium-sized enterprises, Journal of World Business, 43 (4) (2008) 475–485.
https://doi.org/10.1016/j.jwb.2007.11.009
[30] A. Riahi-Belkaoui, The effects of the degree of internationalization on firm performance, International Business Review, 7 (3) (1998) 315–321.
https://doi.org/10.1016/s0969-5931(98)00013-4
[31] W. Ruigrok, W. Amann, H. Wagner, The internationalization-performance relationship at Swiss firms: A test of the S-shape and extreme degrees of internationalization, Management International Review, 47 (3) (2007) 349–368.
https://doi.org/10.1007/s11575-007-0020-6
[32] W.G. Sanders, M.A. Carpenter, Internationalization and firm governance: The roles of CEO compensation, top team composition, and board structure, Academy of Management Journal, 41 (2) (1998) 158–178.
https://doi.org/10.2307/257100
[33] C. Schwens, F.B. Zapkau, M. Bierwerth, R. Isidor, G. Knight, R. Kabst, International Entrepreneurship: A Meta–Analysis on the Internationalization and Performance Relationship, Entrepreneurship Theory and Practice, 42 (5) (2018) 734–768.
https://doi.org/10.1177/1042258718795346
[34] C. Singla, R. George, Internationalization and performance: A contextual analysis of Indian firms", Journal of Business Research, 66 (12) (2013) 2500–2506.
https://doi.org/10.1016/j.jbusres.2013.05.041
[35] W. Sun, J. Price, Y. Ding, The longitudinal effects of internationalization on firm performance: The moderating role of marketing capability, Journal of Business Research, 95 (February) (2019) 326–337.
https://doi.org/10.1016/j.jbusres.2018.08.014
[36] P. Tashman, V. Marano, J. Babin, Firm-specific assets and the internationalization–performance relationship in the U.S. movie studio industry, International Business Review, 28 (4) (2019) 785–795.
https://doi.org/10.1016/j.ibusrev.2019.03.003
[37] S.M. Tsao, W.H. Lien, Family Management and Internationalization: The Impact on Firm Performance and Innovation, Management International Review, 53 (2) (2013)189–213.
https://doi.org/10.1007/s11575-011-0125-9
[38] P.W. Turnbull, A Challenge to the Stages Theory of the Internationalisation Process, Managing Export Entry and Expansion: Concepts and Practice. (1987)
[39] R. Vernon, International Investment and International Trade in the Product Cycle, The Quarterly Journal of Economics, 80 (2) (1966) 190–207.
http://www.jstor.org/stable/1880689
[40] L.S. Welch, R. Luostarinen, Internationalization: Evolution of a Concept, Journal of General Management, 14 (2) (1988) 34–55.
https://doi.org/10.1177/030630708801400203
[41] S.S. Xiao, I. Jeong, J.J. Moon, C.C. Chung, J. Chung, Internationalization and Performance of Firms in China: Moderating Effects of Governance Structure and the Degree of Centralized Control, Journal of International Management, 19 (2) (2013) 118–137.
https://doi.org/10.1016/j.intman.2012.12.003
[42] L. Zhou, W.P. Wu, X. Luo, Internationalization and the performance of born-global SMEs: The mediating role of social networks, Journal of International Business Studies, 38 (4) (2007) 673–690.
https://doi.org/10.1057/palgrave.jibs.8400282
https://doi.org/10.1057/s41267-018-0146-8
[2] H.G. Barkema, F. Vermeulen, International expansion through start-up or acquisition: A learning perspective, Academy of Management Journal, 41(1) (1998) 7–26.
https://doi.org/10.2307/256894
[3] J. Barney, Firm resources and sustained competitive advantage, Journal of Management, 17 (1) (1991) 99–120.
[4] D. Benito-Osorio, A. Colino, L.Á. Guerras-Martín, J.Á. Zúñiga-Vicente, The international diversification-performance link in Spain: Does firm size really matter?, International Business Review, 25 (2) (2016) 548–558.
https://doi.org/10.1016/j.ibusrev.2015.09.004
[5] A.M. Bobillo, F. López-Iturriaga Felix, F. Tejerina-Gaite, Firm performance and international diversification: The internal and external competitive advantages, International Business Review, 19 (6) (2010) 607–618.
https://doi.org/10.1016/j.ibusrev.2010.03.006
[6] B.K. Boyd, Contingency Model, Strategic Management Journal, 16 (May) (1995) 301–312.
https://www.emeraldinsight.com/doi/full/10.1108/17538390910946267
[7] D.M. Brock, T. Yaffe, M. Dembovsky, International diversification and performance: A study of global law firms, Journal of International Management, 12 (4) (2006) 473–489.
https://doi.org/10.1016/j.intman.2006.08.003
[8] P.J. Buckley, X. Tian, Internalization theory and the performance of emerging-market multinational enterprises, International Business Review, 26 (5) (2017) 976–990.
https://doi.org/10.1016/j.ibusrev.2017.03.005
[9] J.L. Calof, P.W Beamish, Adapting to foreign markets: Explaining internationalization, International Business Review, 4 (2) (1995) 115–131.
https://doi.org/10.1016/0969-5931(95)00001-G
[10] S. Chen, H. Tan, Region effects in the internationalization-performance relationship in Chinese firms. Journal of World Business, 47 (1) (2012) 73–80.
https://doi.org/10.1016/j.jwb.2010.10.022
[11] F.J. Contractor, V. Kumar, S.K. Kundu, Nature of the relationship between international expansion and performance: The case of emerging market firms, Journal of World Business, 42 (4) (2007) 401–417.
https://doi.org/10.1016/j.jwb.2007.06.003
[12] F.J. Contractor, S.K. Kundu, C.C. Hsu, A three-stage theory of international expansion: The link between multinationality and performance in the service sector, Journal of International Business Studies, 34 (1) (2003) 5–18.
https://doi.org/10.1057/palgrave.jibs.8400003
[13] A. Cuervo-Cazurra, L. Ciravegna, M. Melgarejo, L. Lopez, Home country uncertainty and the internationalization-performance relationship: Building an uncertainty management capability, Journal of World Business, 53 (2) (2018) 209–221.
https://doi.org/10.1016/j.jwb.2017.11.002
[14] G. de Jong, J. van Houten, The impact of MNE cultural diversity on the internationalization-performance relationship. Theory and evidence from European multinational enterprises, International Business Review, 23 (1) (2014) 313–326.
https://doi.org/10.1016/j.ibusrev.2013.05.005
[15] V. Van Dut, The effects of local business environments on smes’ performance: Empirical evidence from the Mekong Delta, Asian Academy of Management Journal, 20 (1) (2015) 101–122.
[16] B. Elango, S.P. Sethi, An exploration of the relationship between country of origin (COE) and the internationalization-performance paradigm, Management International Review, 47 (3) (2007) 369–392.
https://doi.org/10.1007/s11575-007-0021-5
[17] J.N.Garbe, N.F. Richter, Causal analysis of the internationalization and performance relationship based on neural networks - advocating the transnational structure, Journal of International Management, 15 (4) (2009) 413–431.
https://doi.org/10.1016/j.intman.2008.10.002
[18] M.A. Hitt, L. Tihanyi, T. Tihanyi, B.Connelly, International diversification: Antecedents, outcomes, and moderators, Journal of Management, 32 (6) (2006) 831–867.
https://doi.org/10.1177/0149206306293575
[19] C.C. Hsu, A. Pereira, Internationalization and performance: The moderating effects of organizational learning, Omega, 36 (2) (2008) 188–205.
https://doi.org/10.1016/j.omega.2006.06.004
[20] W.T. Hsu, H.L. Chen, C.Y. Cheng, Internationalization and firm performance of SMEs: The moderating effects of CEO attributes, Journal of World Business, 48 (1) (2013) 1–12.
https://doi.org/10.1016/j.jwb.2012.06.001
[21] G.T.M. Hult, D.J. Ketchen, D.A. Griffith, B.R. Chabowski, M.K. Hamman, B.J. Dykes, W.A. Pollitte, S.T. Cavusgil, An assessment of the measurement of performance in international business research, Journal of International Business Studies, 39 (6) (2008) 1064–1080.
https://doi.org/10.1057/palgrave.jibs.8400398
[22] S. Hymer, International operations of national firms: A study of foreign direct investment, Boston, MA: MIT Press. (1976)
[23] J. Johanson, J.-E. Vahlne, The Internationalization Process of the Firm—A Model of Knowledge Development and Increasing Foreign Market Commitments, Journal of International Business Studies, 8 (1977) 23-32.
https://doi.org/10.1057/palgrave.jibs.8490676
[24] J. Johanson, F. Wiedersheim‐Paul, The Internationalization of the Firm — Four Swedish Cases, Journal of Management Studies, 12 (3) (1975) 305–323.
https://doi.org/10.1111/j.1467-6486.1975.tb00514.x
[25] W.T. Lin, Y. Liu, K.Y. Cheng, The internationalization and performance of a firm: Moderating effect of a firm’s behavior, Journal of International Management, 17 (1) (2011) 83–95.
https://doi.org/10.1016/j.intman.2010.12.004
[26] J.W. Lu, P.W. Beamish, The internationalization and performance of SMEs, Strategic Management Journal, 22 (6–7), (2001) 565–586.
https://doi.org/10.1002/smj.184
[27] V. Marano, J.L. Arregle, M.A. Hitt, E. Spadafora, M. van Essen, Home Country Institutions and the Internationalization-Performance Relationship: A Meta-Analytic Review, Journal of Management, 42 (5) (2016) 1075–1110.
https://doi.org/10.1177/0149206315624963
[28] S.R. Miller, D. Lavie, A. Delios, International intensity, diversity, and distance: Unpacking the internationalization-performance relationship, International Business Review, 25 (4) (2016) 907–920.
https://doi.org/10.1016/j.ibusrev.2015.12.003
[29] N. Pangarkar, Internationalization and performance of small- and medium-sized enterprises, Journal of World Business, 43 (4) (2008) 475–485.
https://doi.org/10.1016/j.jwb.2007.11.009
[30] A. Riahi-Belkaoui, The effects of the degree of internationalization on firm performance, International Business Review, 7 (3) (1998) 315–321.
https://doi.org/10.1016/s0969-5931(98)00013-4
[31] W. Ruigrok, W. Amann, H. Wagner, The internationalization-performance relationship at Swiss firms: A test of the S-shape and extreme degrees of internationalization, Management International Review, 47 (3) (2007) 349–368.
https://doi.org/10.1007/s11575-007-0020-6
[32] W.G. Sanders, M.A. Carpenter, Internationalization and firm governance: The roles of CEO compensation, top team composition, and board structure, Academy of Management Journal, 41 (2) (1998) 158–178.
https://doi.org/10.2307/257100
[33] C. Schwens, F.B. Zapkau, M. Bierwerth, R. Isidor, G. Knight, R. Kabst, International Entrepreneurship: A Meta–Analysis on the Internationalization and Performance Relationship, Entrepreneurship Theory and Practice, 42 (5) (2018) 734–768.
https://doi.org/10.1177/1042258718795346
[34] C. Singla, R. George, Internationalization and performance: A contextual analysis of Indian firms", Journal of Business Research, 66 (12) (2013) 2500–2506.
https://doi.org/10.1016/j.jbusres.2013.05.041
[35] W. Sun, J. Price, Y. Ding, The longitudinal effects of internationalization on firm performance: The moderating role of marketing capability, Journal of Business Research, 95 (February) (2019) 326–337.
https://doi.org/10.1016/j.jbusres.2018.08.014
[36] P. Tashman, V. Marano, J. Babin, Firm-specific assets and the internationalization–performance relationship in the U.S. movie studio industry, International Business Review, 28 (4) (2019) 785–795.
https://doi.org/10.1016/j.ibusrev.2019.03.003
[37] S.M. Tsao, W.H. Lien, Family Management and Internationalization: The Impact on Firm Performance and Innovation, Management International Review, 53 (2) (2013)189–213.
https://doi.org/10.1007/s11575-011-0125-9
[38] P.W. Turnbull, A Challenge to the Stages Theory of the Internationalisation Process, Managing Export Entry and Expansion: Concepts and Practice. (1987)
[39] R. Vernon, International Investment and International Trade in the Product Cycle, The Quarterly Journal of Economics, 80 (2) (1966) 190–207.
http://www.jstor.org/stable/1880689
[40] L.S. Welch, R. Luostarinen, Internationalization: Evolution of a Concept, Journal of General Management, 14 (2) (1988) 34–55.
https://doi.org/10.1177/030630708801400203
[41] S.S. Xiao, I. Jeong, J.J. Moon, C.C. Chung, J. Chung, Internationalization and Performance of Firms in China: Moderating Effects of Governance Structure and the Degree of Centralized Control, Journal of International Management, 19 (2) (2013) 118–137.
https://doi.org/10.1016/j.intman.2012.12.003
[42] L. Zhou, W.P. Wu, X. Luo, Internationalization and the performance of born-global SMEs: The mediating role of social networks, Journal of International Business Studies, 38 (4) (2007) 673–690.
https://doi.org/10.1057/palgrave.jibs.8400282