The effect of the internationalization process on
firm performance for emerging market MNEs,
and the moderating role of distance.
Student:
Kayleigh Tijssen (S2952394)
Supervisor:
Dr. M. J. Klasing
Co-assessor:
Dr. O. Lindahl
Due date:
January 20, 2020
Word count: 13,115
Organization:
University of Groningen
--- Abstract ---
This paper investigates the relationship between the geographical scope of emerging market firms and their performance. Additionally, this paper examines the moderating effects of cultural, institutional, and geographical distance. This paper argues that emerging market multinationals have different capabilities than multinationals from advanced markets. These capabilities can give them advantages that differ from those of advanced market multinationals. Using these capabilities, emerging market multinationals may be more able to face the challenges that come with complexity. In this study, a sample of 2,084 Asian emerging market firms was used. This study shows that even though the capabilities of emerging market multinationals may provide them with better ways to deal with the complexity that comes with a broad geographical scope, scope still has a negative effect on firm performance. When broadening this scope to countries that are distant in culture, this relationship becomes less negative, or even positive. However, when the firms operate in countries that have greater institutional distance, this relationship becomes more negative, suggesting that emerging market multinationals have difficulties navigating different institutional environments. Geographical distance made the relationship less negative or even positive, indicating that expanding to countries that are physically further is profitable for EM MNEs.
1. Introduction
In the IB literature, much research has been done on the role that internationalization plays in firm performance. The construct of internationalization is very broad. According to the study by Vermeulen and Barkema (2002), the internationalization process consists of three elements, pace, scope, and rhythm. Pace is the speed of the internationalization process; this refers to how many international expansions a firm makes in a certain period of time. Scope can refer to either product scope, the industries a company expands to, or geographic scope, the number of different countries a firm is active in. Lastly, rhythm refers to how regular the expansions are, whether the firm follows a clear pattern or internationalizes at an irregular pace.
country, respectively. Another example of dividing scope into elements is dividing it into geovalent attributes that take the environmental complexity into account (Sullivan, 1994), and lastly, the distinction mentioned above between product and geographic scope. The focus of this paper will be on the geographical scope of internationalization.
One of the main reasons why a larger portfolio of countries is seen as unprofitable is the fact that the more countries an MNE operates in, the more complex the environment becomes. The first ones to recognize this were Siddharthan and Lall (1982). Some of these theories come from transaction costs economics (Jones & Hill, 1982) or agency theories (Doukas & Travlos, 1988; Roth & O'donnell, 1996). The transaction cost perspective suggests that transaction costs increase due to the dispersion of agents and principals in a complex environment.
Another reason resides in the fact that countries differ from each other on certain dimensions. These differences can be summarized with the term "distance" or "cross-national distance." The most widely used measure of distance is cultural distance (Hofstede, 1980) that measures distance based on the cultural dimensions; power distance, individualism, masculinity, uncertainty avoidance, long-term orientation, and indulgence vs. restraint. However, many other scholars have used alternate measures of distance. Dunning (1993) constructed a multidimensional framework of distance. This framework did not only consist of culture but also other measures of distance, such as geographic, economic, and political distance. Johanson and Vahlne (1977) constructed a measure of psychic distance, which includes “differences in language, education, business practices, culture, and industrial development.” It is possible that mixed results in previous research could be attributed to distance effects.
demonstrated with an example using Hofstede's cultural dimensions. Company A is located in China and wants to expand to The Netherlands. These two countries differ extensively on the cultural dimensions, one of them being Masculinity – Femininity. China scores high, meaning that it is a masculine society that significantly values performance and achievements. The Netherlands, however, score low, indicating that this is a feminine society that values the quality of life over achievements. Expanding to a country that differs on cultural dimensions increases complexity. Incentives based on achievements that work in China, might not work in The Netherlands. So, companies that have subsidiaries in countries that are far in distance to the home country are harder to manage because the company needs to adapt its practices (Hutzschenreuter & Voll, 2008). I expect that the more distant the countries in a portfolio are, the more complex this portfolio becomes, and thus the more significant the effect of scope on performance. A portfolio of countries that are close in distance to the home market might not have the same impact on performance as a portfolio of countries that are distant to the home country since distance already brings challenges with it. Not much research has been done on the geographical scope and the moderating role of several distance factors. In this paper, this research gap will be addressed. The focus of this paper is on three kinds of distance: cultural, institutional, and geographical.
one of the main contributors to the liability of foreignness (LOF). This is due to the pressure of the host-country institutions on the firm. The last measure of distance that will be used in this paper is geographical distance. Geographical distance is the distance between countries measured in physical distance. Geographical distance can pose barriers in the form of transportation costs, the further away a subsidiary is, the higher the transportation costs will be (Ghemawat, 2001).
There is much that we know about firms and their internationalization decisions. The literature on Advanced Market Multinationals (AM MNEs) and the way these firms strategize and make internationalization decisions is quite extensive. However, emerging markets multinationals (EM MNEs) are often forgotten. Emerging markets have been growing by 4.5 percent in 2018 and are expected to grow by 4.8 percent every year from now, compared to the meager 1.7 percent growth of the Advanced market (IMF, World Economic Outlook, 2019), this is a high percentage. On top of this, according to the Orbis database (2019), 42.7 percent of the companies worldwide originally come from emerging markets. From these numbers, we can conclude that emerging markets are becoming increasingly important, and for this reason, we should also understand how Emerging Market Multinationals (EM MNEs) strategize.
an answer to the following research question“What is the effect of internationalization scope on firm performance for emerging market MNEs, and what is the moderating role of distance?”
In this study, a sample of 2,084 multinational firms from Asian emerging markets will be analyzed on their geographical scope and whether this affects their performance. After this, the role of distance in the internationalization process of EM MNEs will be examined.
In the next section, the theoretical foundation will be outlined, the concepts will be defined, and the hypotheses and the theories behind it will be explained. In the methods section, the data, sample, and the variables and results will be outlined. In the next section, these results will be discussed, limitations of the study will be listed, and an outline for further research is implemented.
2. Literature review
2.1 Internationalization scope.
among other things. The focus of this paper will be on the geographic scope of internationalization.
The research on the relationship between geographical scope and firm performance yields mixing results, studies have found both positive and negative results. Chan Kim et al. (1989) found a positive effect of geographical scope on firm performance, as did Tallman and Li (1996). This positive effect could be due to the ability of firms to stabilize their returns and spread their risks over several markets (Caves & Caves, 1996). Another way in which geographic expansion can improve firm performance is that firms can seek cost-effective markets (Kim, Hwang, & Burgers, 1993). Different countries have different resources and factor endowments, which causes differences in factor costs. One example of this is the labor market; in countries such as China, labor is cheaper than in western countries. One way to seek cost-effective markets is to expand to, for example, China to get cheaper labor. Goerzen and Beamish (2003) divided geographical scope into international asset dispersion and country environment diversity. International asset dispersion refers to the extent of investment that companies have in foreign countries. Country environment diversity refers to the extent that host-countries conditions differ from each other in their environment (i.e., culture, institutions, and resources). They found a positive relationship between performance and international asset dispersion, but a negative relationship between performance and country environment diversity.
Managers may share only the information that is of their interests. Because of this, the monitoring of managerial decisions can become difficult.
Another stream of research found non-linear relationships between performance and geographical scope (Hitt et al., 1997). As the firm starts to diversify its operations globally, it will become more profitable at first; the firm can gain new competencies and benefit from the ability to exploit synergies. At a certain point, the benefits from diversification will decline because the firm becomes too big and complex to manage.
Much research has already been done on geographical scope and performance, but the results remain mixed. This study adds two things to the existing literature. First, it will introduce the concept of distance to explain one of the mechanisms that can influence the relationship between performance and geographical scope. Second, considering that most of the literature on the subject addresses MNEs from advanced markets, a new perspective is needed. As emerging markets are becoming more important in the global economy, the perspective from MNEs from these emerging markets can help provide valuable insights into the concept of geographical scope.
2.2 How emerging market MNEs differ from advanced market MNEs.
aggressive and risk-taking approach in their international expansions to obtain crucial strategic resources.
When AM MNEs expand abroad, they typically use their existing competitive advantages and exploit these in foreign markets to realize the organizational goals (Buckley & Ghauri, 1999; Dunning, 1981). There are many studies on the way that AM MNEs internationalize. The most widely accepted model of internationalization strategy is the Uppsala model (Johanson & Vahlne, 1977, 2003). The Uppsala model suggests that MNEs internationalize incrementally with small steps. They start their internationalization with exports and increase their commitment slowly. Their internationalization process starts with countries that are culturally and geographically close. After they are successful in these markets, they internationalize to more distant countries.
The literature on EM MNEs found that EM MNEs internationalize in a different way than AM MNEs. What is striking about the internationalization process of EM MNEs is that they do not seem to possess the competitive advantages that AM MNEs have. Instead, they embark on an internationalization process to seek resources and capabilities (Mathews, 2002). That is, instead of using their competitive advantages to internationalize, they internationalize to gain competitive advantages. With their internationalization process, EM MNEs try to fill their resource voids with know-how, technology, or brands from other organizations (Child & Rodrigues, 2005).
need to balance their desire to gain a global reach, while also having the need to upgrade capabilities. On the one hand, they expand to other emerging markets to increase in size, gain profits, and gain experience. On the other hand, they expand to developed markets in order to upgrade their capabilities (Guillén & García-Canal, 2009). Lastly, EM MNEs differ from AM MNEs in the speed of internationalization. Where AM MNEs internationalize in small steps starting with exporting, EM MNEs are known for their expansion strategies based on global alliances (Garcı́a-Canal, Duarte, Criado, & Llaneza, 2002) and acquisitions (Rui & Yip, 2008).
2.3 The effect of internationalization scope on firm performance for EM MNEs. As mentioned before, there are conflicting results on the effect of geographical scope on firm performance. To better understand this relationship in the context of EM MNEs, the advantages and disadvantages will be analyzed in the following section. First, the benefits of having a broad geographical scope will be outlined. Second, the difficulties will be described. And lastly, the advantages and disadvantages will be analyzed in the EM MNE context. 2.3.1 Advantages of a broad geographical scope.
There are many benefits associated with internationalization. The theory of operational flexibility (Kogut, 1989) describes an advantage of internationalization; this theory posits that firms can benefit from arbitraging and leveraging opportunities in the global market place. The knowledge-based view (KBV) of the firm suggests that firms that go abroad learn from other firms and increase their knowledge base in this way (Grant, 2002).
They distinguish between the widening and deepening of their network. The widening of the network refers to opening a few subsidiaries in many countries, and deepening refers to opening many subsidiaries in a few countries. They argue that deepening the network diminishes operational flexibility and that widening the network increases operational flexibility. Following the arguments from Kogut's theory of operational flexibility, they make the case that when a firm operates in a broad network, the firm has the opportunity to coordinate activities within an extensive multinational network. Operational flexibility has two main benefits for the firm. First of all, the firm has the ability to shift operational activities to more favorable environments increases cashflows and therefore growth (Mello, Parsons, & Triantis, 1995). Second, operational flexibility within the firm enhances the ability of the firm to respond to price changes, institutional differences, and tax codes. For example, the firm can reduce its tax-liability by exploiting different tax systems in different countries (Denis et al., 2002). Although the benefits of operational flexibility seem high, Kogut does state that the way to operational flexibility is not easy. Before a firm can reap the benefits that come with operational flexibility, it first needs to learn how to deal with the increased complexity and added costs that come with the widening of their scope.
financial resources. These new resources will give the firm an even stronger position in the global industry.
2.3.2 Disadvantages of a broad geographical scope.
Although there are many advantages to internationalization and gaining a broad geographical scope, there are also disadvantages that come with the managing of a firm that becomes bigger and more complex. Goerzen and Beamish (2003) found that country environment diversity hurts firm performance. Much research on geographical diversity argues that this is due to the increasing complexity that comes with a bigger portfolio of countries. As a firm internationalizes to a broader scope of countries, it has to adhere to different rules and regulations, and normative expectations (Kostova & Zaheer, 1999; Meyer, 1983; Roth, 1992). Kostova and Zaheer (1999) claim that this complexity is embedded externally and internally. External complexity is the result of dealing with multiple institutions and multiple sources of authority, and internal complexity is the result of various subdivisions in the firm. As the firm grows, its interfirm network will become more extensive and, therefore, harder to manage (Ghoshal & Bartlett, 1990).
The agency theory perspective argues that a firm consists of agents and principals, managers, and owners, respectively. As the firm grows, and the network of subdivisions increases, the dispersion of agents increases as well. Problems arise because the interest of the principal and the agent do not align. The agent tends to engage in opportunistic behavior, and there is information asymmetry between the principal and the agent. Higher costs thus arise from attempting to minimize this misalignment in interests and monitoring the actions of the agents (Harris et al., 1982).
2.3.3 How will this be different for EM MNEs?
EM MNEs seem to use their internationalization for obtaining resources to compete in an effective way, which is something that they have trouble doing with the resources that they possess in their home country (Luo & Tung, 2007). One of the reasons for this lack of resources is the weak institutional environment in emerging markets (Hoskisson et al., 2000; Wright et al., 2005).
Research on the internationalization process of EM MNEs found that EM MNEs follow a different path than AM MNEs. AM MNEs follow the Uppsala model, which is a step-by-step model that internationalizes to one country at a time. The EM MNEs seem to benefit from a dual path that targets emerging markets and developed markets at the same time (Guillén & García-Canal, 2009).
EM MNEs engage in exploration as well as exploitation. On the one hand, EM MNEs expand to other emerging markets to exploit their competitive assets. Hu (1995) and Guillen (2000) explain that the resources or strategic assets found in emerging markets are often situation-specific. Therefore, these resources are not easily transferred to advanced markets, but they can be a competitive advantage in other emerging markets. Although knowledge creation in these markets is not feasible due to the same constraints as in the home country, firms are able to exploit their competitive advantages in these markets (Wright, Filatotchev, Hoskisson, & Peng, 2005). In this way, EM MNEs can improve their size, experience, and profitability. On top of this, EM MNEs may have an advantage over competing AM MNEs in the developing countries. Because EM MNEs are already used to the inadequate institutional and legal frameworks that often reside in these markets (Ghemawat & Khanna, 1998; Khanna & Palepu, 1997), they know how to deal with these ‘voids’ and are mostly better in managing them.
capabilities needed to start competing in the global market. On top of this, institutions in developed countries are often better than the institutions found in the home countries of EM MNEs. Risks of appropriation and corruption are usually lower, which makes it easier to do business in these markets (Lu, Zhou, & Li, 2007).
For the reason that EM MNEs benefit from a dual expansion path, internationalizing to both developed, developing, and the least developed markets, I expect the relationship between geographical scope and performance to be positive in the case of EM MNEs. Therefore, I hypothesize the following:
Hypothesis 1: Having a broad geographic scope will have a positive effect on firm performance for emerging market multinationals.
2.4 Distance
Distance is a much-researched subject in the IB literature. It is studied this much because of the consequences it has for managing an MNE. Distance between countries is seen as an obstacle that prevents the flow of information from and to the host market, and it will make it harder for the firm to transfer its competitive advantages to the host market (Johanson & Vahlne, 1977; Palich & Gomez-Mejia, 1999).
firm is not confident about the resources that it needs to commit to the new country (Petersen, Pedersen, & Lyles, 2008). Another way in which uncertainty is caused is discrimination against foreign firms by local consumers, suppliers, and authorities. This is also called the liability of foreignness (Zaheer, 1995). The liability of foreignness is a concept that explains that firms incur social costs because the foreign environment views them as outsiders. The firm is unfamiliar with the normative, cognitive, and regulative circumstances in the alien environment, and therefore is at risk of unfamiliarity hazards, discrimination hazards, and relational hazards (Eden & Miller, 2004; Zaheer, 2002). Yet another disadvantage of distance is the difficulty of the transferability of knowledge internally. If the headquarter and the subsidiary are different and do not have an ‘intimate’ relationship, the transfer of knowledge becomes hard, especially if the knowledge is tacit (Szulanski, 1996). Furthermore, the transfer of other properties, such as innovation (Dellestrand & Kappen, 2012), organizational practices (Kostova, 1999), and new technologies (Cui et al., 2006) also becomes more difficult as distance increases.
Although the distance between the countries a firm is active in has its disadvantages, it also has some advantages. O'grady and Lane (1996) found that distance can even cause better decision-making. They describe that this is due to the perceptions of managers. When countries are close, managers seem to underestimate the efforts that should go into understanding these close countries. In contrast, countries that are distant encourage managers to grasp the opportunity to learn more about these markets and adopt new routines throughout the whole company in areas where the subsidiary in a host market performs better than others (Morosini, Shane, & Singh, 1998).
economic distance (CAGE). In their summary of the literature on distance, Hutzschenreuter, Kleindienst, and Lange (2016) used cultural, geographic, economic, institutional, and psychic distance. In this study, three measures of distance will be used. These measures are cultural, institutional, and geographic distance.
2.4.1 Cultural distance
If we refer to culture, we often refer to the famous quote by Hofstede (1980): "culture is the collective programming of the mind, which distinguishes one human group from another." In other words, culture is what makes us different from one another and makes us feel connected to our own 'group.' This group could refer to nations, gender, ethnicity, organizations, among other things. Culture has been used extensively in the IB literature because it can complicate the way we do business (Chui, Lloyd, & Kwok, 2002; Gibson, 1999). Hofstede (1980) was the first to measure culture using dimensions. After him, many other scholars tried to identify new dimensions to measure culture (House et al., 2004; Schwartz, 2006; Trompenaars, 1985).
Operating in an environment where cultures are very distant from each other, is said to impede performance, it would increase transaction, agency, and operational costs for MNEs, which makes it harder to survive in such an environment (Li, 1995; Park & Ungson, 1997). Because of findings like this, it is no surprise that we have linked cultural distance to lower firm performance (Chang, 1995; Li & Guisinger, 1992; Luo & Peng, 1999). This negative effect is mainly due to the lack of understanding of other values, norms, and perceptions.
organizational routines are deeply rooted in culture, and being present in multiple cultures can foster organizational learning and adaptation of these routines (Ghoshal, 1987; Morosini et al., 1998). Moreover, managers who are present in multiple cultures have a better understanding of different points of view and can enhance their problem-solving skills (Gomez-Mejia & Palich, 1997).
The effect of culture on the relationship between geographical scope and performance in EM MNEs:
For AM MNEs, cultural distance may be an impeding factor in internationalizing; this is due to the complexity that different cultures bring (Hutzschenreuter & Voll, 2008). Another reason is that AM MNEs internationalize using competitive advantages that were initially made in the home country. These competitive advantages may be viewed differently in another context. Different cultures have different values and perceptions. Therefore, a practice or routine that may be seen valuable in one culture can be deemed irrelevant in another (Ambos & Ambos, 2009). The main part of the literature on culture has focused on these AM MNEs, but a new perspective is needed that focuses on the characteristics of EM MNEs and how cultural distance affects them.
pertinent in one culture than in another, and therefore managers in other cultures may disregard this information.
Geographical scope is a factor that adds considerable complexity to the internationalization process. The primary way to overcome the drawbacks of this complexity for EM MNEs is to gain new capabilities, resources, and competencies from developed markets. Considering that cultural distance greatly hinders this process, I expect it to be less profitable or even unprofitable for EM MNEs to expand to countries that vary greatly in culture. For the moderating effect of cultural distance, I expect that when EM MNEs broaden their scope to countries that are culturally close, they will have to deal with the complexity that comes with broadening the geographical scope, but the added complexity from dealing with different cultures will be minimized. On the other hand, when EM MNEs expand their scope to countries that are distant in culture, and their average cultural distance is higher, the EM MNE has to deal with cultures that it is not familiar with. Here, the complexity of cultural distance comes on top of the complexity that comes with a broader geographical scope. The high cultural distance in this situation causes the above-described problems of complexity and lack of understanding. Thus, all else being equal, an EM MNE that expands to a scope of countries that are culturally close, will experience an overall positive effect from the broadening of the scope, while an EM MNE that expands to a scope of culturally distant countries will encounter additional problems that emanate from this cultural distance that results in lower firm performance. Therefore, I hypothesize that as the geographical scope of EM MNEs increases, it will be more beneficial for the EM MNEs to expand to countries with similar cultures than to countries that vary greatly in culture.
Hypothesis 2a: Culture negatively moderates the positive relationship between geographical scope and performance in the way that as the firm expands its scope to countries that greatly
2.4.2. Institutional distance
North (1990) defined Institutions as "the rules of the game in a society or, more formally, the humanly devised constraints that shape human interaction." Institutions have three elements: cognitive, normative, and regulative (Scott, 2001). Every country differs in its institutional environment. That is, every country has different rules and regulations, norms and values, and perceptions of daily life. Firms that operate in an international context have to navigate through different institutional environments and try to conform to different expectations. This navigating is difficult for multinationals because they face dual pressure (Rosenzweig & Singh, 1991); they face pressure from the home country to conform to the home norms, and they face pressure from the host country to conform to their local standards. Kostova and Zaheer (1999) argued that if firms were able to conform to these expectations, they would gain legitimacy in the foreign market and would, therefore, be more prone to survive.
The effect of institutions on the relationship between geographical scope and performance in EM MNEs
One of the characteristics of MNEs from emerging markets is that they come from countries with weak institutions, infrastructures, and market-mechanisms, and unstable political conditions. (Khanna & Palepu, 1997). This characteristic may give EM MNEs an advantage over AM MNEs in the least developed markets because they know how to deal with weak institutional environments and can more easily navigate through these markets (Cuervo-Cazurra & Genc, 2008). Therefore, internationalizing to countries with a weaker institutional environment will result in benefits for the firm performance, they even outperform firms from developed countries because these firms find it challenging to deal with the weak institutional contexts in these countries.
In countries with a secure and stable institutional environment, it may be hard to gain legitimacy for EM MNEs. They first need to overcome the 'liability of foreignness' (Zaheer, 1995), which are the costs of business that arise from being an 'outsider.' For EM MNEs, the dual pressure to conform to both the home and host country would mean that in the home country some practices are allowed that are not permitted in the host country. This results in the need to adopt new practices and routines; this can be timely and costly. But when the firm gains legitimacy, the institutional environment in developed countries may also be beneficial for EM MNEs. In these markets, risks of appropriation and corruption are usually lower (Lu et al., 2007), which decreases the risks that EM MNEs face in their own country. Furthermore, EM MNEs possess better political capabilities (Guillén & García-Canal, 2009) Therefore, when an EM MNE can overcome the difficulties of adapting to the new rules, the environment can be more supportive for business than the home market.
environment is weaker, it has advantages over AM MNEs that want to operate here. In countries where the institutional environment is stronger, there are fewer risks than in the home market. I expect that these advantages will outweigh the disadvantages because one of the most significant obstacles of EM MNEs is the fact that they come from weak institutional environments. Therefore, exploiting differences between institutional settings can help them to improve their position in the global market. Even though the advantages of institutional distance outweigh the disadvantages, it may be hard to get into institutionally distant countries due to the liability of foreignness. The liability of foreignness is a big obstacle that needs to be overcome before EM MNEs can reap the benefits of the institutional distance.
For the moderating effect, I expect the following; if EM MNEs broaden their scope to institutionally close countries (i.e., other emerging markets), they will have to deal with the complexity of the scope. However, they do not have the opportunity to take advantage of institutional differences. On the other hand, when EM MNEs broaden their scope to institutionally distant countries, either the least developed countries, developed countries, or both, they have the opportunity to exploit institutional differences, which can boost their firm performance. Therefore, I expect that all else being equal, the positive effect of geographical scope on performance will be even more positive when this scope includes institutionally distant countries. Therefore, I hypothesize the following:
Hypothesis 2b: Institutional distance positively moderates the positive relationship between geographical scope and performance in the way that as the firm expands its scope to countries that greatly vary in their institutional environment, this relationship will become
2.4.3. Geographical distance
The importance of geographic distance was already mentioned over 60 years ago by Beckerman (1956). In his research he discussed why geographic distance was important for trade and what its complications were. He found that countries usually traded with their neighboring countries, this was easier and kept the costs of transport low. This trend resulted in blocks of successful countries that were near each other, strengthening each other’s position. He additionally found that the poorer countries were simply located further away from the more successful countries and he argued that this was one of the reasons that they lagged behind. The geographical distance between them and the wealthier nations posed a barrier for their trade flows. According to Beckerman, this indicated that geographical distance was a big factor in determining trade flows. Although Beckerman did his research more than 60 years ago and much has changed since then, geographical distance is still a much-discussed topic in the IB literature.
As globalization increases, information can be more easily spread. Scholars expected that the relevance of geographical distance would decline; however, the opposite is true. In their study on cross-border equity flows, Portes and Rey (2005) found that distance still matters. They found that as geographic distance increases, cross-border equity flows fall. Freund and Weinhold (2004) found little evidence that the internet influences trade through distance. Distance still influences trade through transportation costs, and these are not affected by the internet. Therefore, transportation costs arising from geographical distance still seem as relevant today as they were 60 years ago.
The effect of geographical distance on the relationship between geographic scope and performance in EM MNEs
As noted above, geographical distance seems to affect international business mainly through the costs of transporting goods from one location to another. These transportation costs make internationalization and trade more costly. Geographical distance also affects communication. Two subsidiaries that are far in distance can fail to feel like they are from the same team (Holmstrom et al., 2006). This study mentions that to overcome geographical barriers to communicate, a firm can reduce the distance between team members. However, this is not always a feasible option.
gives them the ability to produce efficiently and efficiently execute projects (Goldstein, 2007; Mathews, 2006). Third, they have good networking skills, which also originates from the need to adopt practices from other companies. Because of this, the firms learn how to build an effective network around them (Buckley et al., 2010). Lastly, EM MNEs use their mergers and acquisitions (M&As) for the purpose of learning from them, instead of seeing them as 'cash-cows' as AM MNEs do. Because of this, EM MNEs manage M&As differently than AM MNEs do, which gives them the ability to execute acquisitions efficiently (Guillén & Guillén, 2005; Kumar, 2009). Because of these advantages, EM MNEs are able to deal with the dynamic environment, and they are able to make internationalization profitable. However, none of these advantages can be used to offset transportation costs. Furthermore, one of the disadvantages of EM MNEs is that they lack certain resources when they start their internationalization (Mathews, 2006), which may make it even harder to deal with the additional transportation costs.
EM MNEs are known to internationalize to geographically distant countries faster than AM MNEs do. But the literature on these EM MNEs does not provide any advantages that they can use to offset the costs that come with increased geographical distance. Therefore, I expect that when EM MNEs broaden their geographical scope to countries that are further in physical distance, the costs that arise from transportation and communication difficulties will not offset the additional profits.
Hypothesis 2c: Geographical distance negatively moderates the relationship between geographical scope and performance in the way that as the firm expands its scope to countries that are further in physical distance, this relationship will become less positive, or
In figure 1, the conceptual model of this research is depicted.
3. Research Methodological context
3.1. Data and sample
public companies. Companies from all kinds of industries were included in the analysis. No particular industry was excluded. After selecting the companies on available data, the total number of subsidiaries was 83,320. After collapsing the data by company and excluding missing observations, the final sample consisted of 2,084 companies.
3.2. measures
3.2.1. Dependent variable
Financial performance: The dependent variable in this study is financial performance
and will be measured with a profitability measure. Following Hitt et al. (1997), an accounting-based measure of profitability will be used, this measure is return on assets (ROA) and is the ratio of net income to assets in a given year.
3.2.2. Independent variable
Internationalization scope: For internationalization scope, the geographical scope of
firms will be used. Following Vermeulen and Barkema (2002), the geographical scope will be measured as the number of foreign countries where a firm has subsidiaries. This information is provided by Orbis. The number of countries a firm is active in was calculated by counting the number of different country codes.
3.2.3. Moderator variables:
Cultural distance: For cultural distance, one average measure for each company was
!"#$"%&# ()*$&+,- = /0123 − 1256789:/<2}/6 2 2?@ Where: 123 = Aℎ- )+(-C DE% $ℎ- )$ℎ ()F-+*)E+ &+( $ℎ- G$ℎ ,E"+$%H <) = $ℎ- I&%)&$)E+ ED $ℎ- )$ℎ ()F-+*)E+
The first step is to square the differences between the scores of the home and host country. Next, these scores are divided by the variance of the sample. This is done for all country pairs on all dimensions. After, the average is taken of the six dimensions for each country pair. For the companies, the weighted average was then taken for all the home-host country combinations and their scores. For example, Let's say that the cultural distance from India to Taiwan is 0.3, and the distance from India to Germany is 0.7. For a firm from India that has three subsidiaries of which two in Germany and one in Taiwan, the cultural distance is calculated as follows: 0.3 + 0.7 + 0.7 / 3 = 0.567.
Institutional distance: Following Law, Lim, and Ismail (2013), the World Governance
Geographical distance: Geographical distance is calculated as the actual distance
between two countries in 1,000 kilometers. For this measure, the geographic distance from the Centre d'Etudes Prospectives et d'Informations Internationales (CEPII) was used (Mayer & Zignago, 2011). The distance was calculated using the latitudes and longitudes from the most important cities in a country. The distance was calculated using a 'great circle formula.' The great circle formula measures physical distance by taking the shortest distance between two points, and measures this along the surface of the earth.
For geographical distance, the weighted average was calculated in the same way as with institutional and cultural distance.
3.2.4. Control variables
Firm size: Firm size is said to influence firm performance. Previous studies on firm
size have shown that there is a positive relationship between firm size and performance (Greve, 2008). Firm size will be measured by using the number of employees. Because the measure on employees contains outliers, the log of the variable will be used in the analysis.
Firm age: Previous studies found that firm age can have an effect on performance.
Orser, Hogarth-Scott, and Riding (2000) found that younger firms tend to grow more, and older firms were declining. Firm age is calculated by subtracting the year of incorporation from 2018 and will be measured in years.
Industry: The industry that a firm operates in is shown to impact the profitability of the
category a bit further. For example, take the NACE code 1.4.5., the first 1 stands for Agriculture, the 4 stands for Animal Production, and the 5 stands for goats and sheep. This study only takes the first digit of the NACE code, because this study controls for the broadest category of industry.
GDP per capita: The country where a firm operates also has an effect on performance
(Goldszmidt, Brito, & de Vasconcelos, 2011). GDP per capita is one of the country-level factors that will influence a firm’s profitability. GDP per capita was retrieved from the Worldbank. GDP per capita is averaged per firm in the same way as the distance measures. GDP is measured in $1,000.
Scale: Scale is defined as the number of subsidiaries that a firm has outside of its home
country. Globalization scale is related to the scope of the firm, as an increase in scope is associated with an increase in scale. On top of this, Bolaji and Chris (2014) found that the degree of internationalization affects the performance of a firm. Scale will be measured as the number of subsidiaries that a firm has.
3.3. Model specification
For the first hypothesis, a simple linear regression model was used to measure the effect of the independent variable on the dependent variable. For the other hypotheses that test the moderating effects and thus included multiple independent variables, a multiple regression was used that included the interaction terms for the moderating variables. The data is cross-sectional, and to prevent unobserved differences between home countries from influencing the dependent or independent variables, home country fixed effects were used.
To determine whether heteroskedasticity would be a problem, the Breusch-Pagan test was performed. The outcome of this test was P<0.000. To prevent the test results from being affected by this, the robust standard error was used in the regression.
3.4. Results
Table 1 reports the correlation table and descriptive statistics for the variables that were used in the analysis. Some of the variables show a high correlation, which could affect the results of the regression. These are the correlations between cultural distance and geographical distance (0.82), and GDP per capita (0.74). The correlation between cultural distance and geographical distance is higher than 0.8 so multicollinearity can be a problem. After analyzing the three distance measures separately and together, factor analysis will be done to eliminate the problem of multicollinearity.
In model 1, the direct effect of scope is tested, which is not significant at p < 0.10. the models 2-7 show a significance of either p < 0.01 or p < 0.05 for scope. The coefficient of scope is negative in all models, which contradicts hypothesis 1 that expected a positive direct effect of scope on firm performance. This suggests that increasing the scope of the firm will cause the performance of the firm to decline. Therefore, hypothesis 1 is not supported in any of the models.
Model 1 Model 2 Model 3 Model 4 Model 5 Model 6 Model 7 Geographic scope -0.077 (0.042) -0.099** (0.037) -0.248*** (0.046) -0.147* (0.067) -0.266*** (0.052) -0.257*** (0.047) -0.150*** (0.021) Cultural distance -2.785** (1.114) -3.334** (1.168) -2.773** (1.101) -2.690** (1.009) -3.809* (1.773) Institutional distance 2.168*** (0.630) 2.250*** (0.646) 1.969** (0.747) 2.228*** (0.650) 3.991*** (0.890) Geographical distance 0.397 (0.260) 0.413 (0.254) 0.393 (0.256) 0.261 (0.273) 0.252 (0.405) Distance (factor) -0.535 (0.364) Scope x cultural distance 0.143** (0.054) 0.279 (0.173) Scope x institutional distance 0.062 (0.064) -0.492** (0.165) Scope x geographical distance 0.033* (0.016) 0.049 (0.041) Scope x Distance (factor) 0.061* (0.030) Firm size (logged) 1.550*** (0.236) 1.558*** (0.257) 1.579*** (0.256) 1.566*** (0.260) 1.586*** (0.254) 1.576*** (0.257) 1.564*** (0.228) Firm age -0.021 (0.017) -0.023 (0.017) -0.022 (0.017) -0.023 (0.017) -0.022 (0.017) -0.020 (0.016) -0.021 (0.017) Industry -0.192*** (0.033) -0.213*** (0.037) -0.216*** (0.036) -0.213*** (0.037) -0.217*** (0.035) -0.224*** (0.032) -0.205*** (0.034) GDP per capita -0.004 (0.034) 0.020 (0.022) 0.016 (0.018) 0.019 (0.021) 0.017 (0.019) 0.019 (0.021) 0.024 (0.038) Scale -0.011*** (0.002) -0.011*** (0.002) -0.009*** (0.002) -0.010*** (0.002) -0.009*** (0.002) -0.009*** (0.001) -0.011*** (0.002) Constant -8.525*** (1.527) -9.203*** (1.996) -8.924*** (1.950) -9.105*** (1.931) -8.891*** (1.979) -8.969*** (2.050) -8.732*** (1.768) Country fixed
effects YES YES YES YES YES YES YES
R-squared
Within 0.0409 0.0449 0.0458 0.0450 0.0457 0.0471 0.0419
Sample size 2,084 2,084 2,084 2,084 2,084 2,084 2,084
Model 5 shows the results for the moderating effect of geographical distance. The positive and significant coefficient (b = 0.033, p < 0.10) suggests that geographical scope positively moderates the relationship between scope and performance. Even though the effect is small, the results suggest a positive moderating effect in all models. In other words, the relationship between scope and performance becomes less negative or even positive when the geographical distance increases. Hypothesis 2c suggested the opposite. It suggested that the moderating effect of geographical scope would be negative. Therefore, the hypothesis was not confirmed.
Because the Pearson correlations for the distance measures were quite high, model 7 includes a factor analysis. The factor analysis showed that the three measures could be put together in one factor. The new factor was named 'distance' and contained the three distance measures. The kmo value was 0.7157, which is an acceptable value to continue with this factor. A regression analysis with the distance measure showed no significant result for the direct effect of distance but was significant (b = 0.061, p < 0.010) for the moderating relationship. This coefficient means that the overall distance positively moderates the relationship between scope and performance. In other words, if the overall distance increases, the negative effect of scope on performance becomes less negative or even positive.
4. Discussion and directions for future research
4.1. Discussion
This model shows how AM MNEs incrementally internationalize to countries that are close in culture, institutional environment, and physical distance. Scholars increasingly note that EM MNEs act differently than AM MNEs in a variety of ways. They internationalize at a faster pace and have a dual-path strategy (Guillén & García-Canal, 2009). EM MNEs do not only internationalize different than their AM MNE counterparts, they also have a different set of capabilities that they use in their expansion, such as better political capabilities (Ghemawat & Khanna, 1998).
This study researches whether internationalization scope and distance are barriers for EM MNEs as they are for AM MNEs, or if EM MNEs can turn them into an advantage using their unique capabilities and strategies.
4.1.1 main arguments
The theory on internationalization scope found both positive and negative effects. On the one hand, a firm can gain benefits from broadening their scope by the ability to spread risks, choosing cost-effective markets (Kim et al., 1993), stabilizing returns (Caves & Caves, 1996), and deriving learning benefits from the varying environments (Lin, 2012). On the other hand, internationalizing can complicate business by increasing complexity (Denis et al., 2002). This complexity is caused by differences in environments such as different rules and regulations (Roth, 1992), and can cause agency and transaction costs (Bodnar et al., 1997; Goerzen & Beamish, 2003).
capabilities that they learn in developed countries. However, at the same time, they need income for growth, and they achieve this in the developing countries that they know and where they established a market already. For the reason that this dual path seems to be optimal for EM MNEs, I hypothesized that scope is positively related to firm performance in the case of EM MNEs.
In addition to the scope hypothesis, I also hypothesized that distance will influence this relationship. Distance is a much-discussed topic in the IB literature. In this study, cultural, institutional, and geographical distance are taken to present three distance challenges. First of all, cultural distance presents the difference in human behavior and values that expresses itself in distinct groups (Hofstede, 1980). Cultural distance has negative as well as positive implications for international business. On the one hand, it increases transaction, agency, and operational costs (Li, 1995). On the other hand, managers can learn from different cultures (Morosini et al., 1998). Although firms can derive learning benefits from cultural distance, Uhlenbruck (2004) suggests that this learning can also be obstructed by cultural distance, because cultural differences can cause misunderstandings and misinterpretations. Therefore, I hypothesized that cultural distance will make the positive relationship between scope and performance weaker.
Therefore, I hypothesized that institutional distance will make the positive relationship between scope and performance stronger.
Lastly, I hypothesized that geographical distance will negatively moderate the relationship between scope and performance because geographical distance can increase transportation costs for MNEs (Krugman, 1991). Even though globalization is decreasing distances between subsidiaries, distance still matters (Portes & Rey, 2005). Although EM MNEs have many advantages that help them operate in the global field, I have not found any evidence in the literature that these advantages can help them to reduce transportation costs.
4.1.2 Findings
small but positive effect on the relationship between scope and performance, suggesting that the more distance there is between a host country and the home country, the less the negative effect of scope on performance.
Lastly, the distance factor was also significant as a moderating variable at p < 0.10. The coefficient of distance positive and significant. This suggests that either cultural and geographical distance outweigh institutional distance, or, that all the distance measures taken together may create an environment that entails opportunities for the EM MNEs.
4.1.3. Research implications:
These findings have several implications for IB research into emerging markets. Even though the hypotheses of this study were not supported, they still have implications for research.
performance, which could suggest that the complexity that comes with a significant country portfolio offsets the advantages.
Secondly, this study also provides insight into the moderating effects of distance on the relationship between geographical scope and performance. Cultural distance significantly and positively moderates the relationship between scope and performance. This could be due to the improved learning skills that can be developed when dealing with different cultures. These enhanced learning skills are a valuable asset concerning the exploration attempts of EM MNEs. The research implication here is that even though cultural distance can bring many challenges to the internationalization process, EM MNEs use their learning capabilities to turn it into an advantage. Another area that is advantageous for EM MNEs is geographical distance, even though geographical distance brings transportation costs, EM MNEs can turn it into an advantage. Institutional distance is an area that still needs to be improved. Even though the different institutional environments offer opportunities to arbitrage different rules and regulations, the liability of foreignness is still hard to overcome for EM MNEs.
environments. In other words, if the host-country's consumers, suppliers, or government perceives the EM MNE as an outsider, this can obstruct the efficiency of integrating into the host country. Furthermore, the lack of knowledge of the country and its culture, practices, and standards can further complicate the entry in the host country (Zaheer, 1995). If these barriers to entry cannot be overcome, due to a lack of understanding or a lack of resources and capabilities, the benefits from the political know-how cannot be achieved either. The implication for research here is that the political know-how and the ability to replicate and adopt new practices may not work for the EM MNEs advantage if the barriers to entry cannot be overcome.
4.1.4 Managerial implications:
country before they attempt to enter it. In general, companies are accepted in the local environment when they conform to the expectations of the host country. This means that there is pressure to become more like the companies in the host country (Zaheer, 1995). One of the ways to learn about a country's institutions that are described in the literature is an entry mode with low resource commitment at first (Dow & Larimo, 2009). Thus, in order to take advantage of different institutional environments, EM MNEs first need to overcome the liability of foreignness.
Thirdly, this paper provides evidence that EM MNEs can exploit differences in culturally distant countries and that they benefit from geographic distance. One of the reasons that cultural distance positively moderates the relationship between scope and performance can be that EM MNEs can learn from different cultures and apply this knowledge throughout the organization. Being present in multiple cultures enhances the problem-solving skills of its managers. Another finding is the positive effect of geographical scope on performance. Suggesting that if EM MNEs internationalize to countries that are further away, this is beneficial to the firm. This finding could be because the EM MNEs are close to other emerging countries, and developed countries have more resources and more significant and wealthier markets, thus going to physically distant markets enables them to tap into these wealthier markets.
they also learn how to deal with institutional differences and are thus able to eliminate the liability of foreignness.
4.2. limitations
There are several limitations to this study. First of all, this study is a Master Thesis and is therefore performed in the time span of six months. This period is a limitation because it does not allow for a thorough screening of the data and performing multiple tests to check for the robustness of the results. This short period also means that it was not possible to conduct longitudinal research, which may be necessary to capture the actual effects of internationalization scope. With longitudinal research, it is possible to capture the effects of scope and distance over time. This makes it possible to study whether the performance of a single firm changes when it expands its scope to distant or close countries and what the additional effect of one expansion is. Because longitudinal data is beyond the scope of this paper, it is only possible to study the effect between firms, e.g., if a firm that expands to close countries has a different firm performance than a firm that expands to distant countries. It would have been more informative to know whether the same firm’s performance declines or rises with expanding to distant or close countries.
Secondly, the research was performed using a sample of Asian emerging market multinationals. This sample may be a good representation of the way that the Asian EM MNEs behave. However, it is possible that this is not generalizable to other EM MNEs, such as the Eastern European EM MNEs, or the EM MNEs from South America. Further research on this subject is needed to determine whether the effects of this study hold in other cases.
values of 0.300 and 0.176. Denis et al. (2002) find values that range between 0.2 and 0.3. Compared to these R-squared values, the value in this study (fluctuating around 0.04) still seems low. There could be other factors that also affect the performance of the firms that this study did not account for.
Lastly, as mentioned in this study, many scholars have pointed out that geographical scope is a broad construct and can be divided into other elements. Examples of this are; related and unrelated diversity (Vachani, 1991), and international asset dispersion and country environment diversity (Goerzen & Beamish, 2003). This study ignored these distinctions and used geographical scope as one construct following Johanson and Vahlne's (2003) definition; the number of countries a firm expands to. The ignoring of different elements of geographical scope could result in bias and is, therefore, a limitation of this study.
4.3. Directions for future research
The results of this study inspire some additional questions about the topic. First of all, I argued that for EM MNEs, the effect of scope may be positive because they do not have the same incentives to go abroad and the same competitive advantages that AM MNEs do. This study found that scope still has a negative effect on firm performance, but it does not compare EM MNEs with AM MNEs. Future research could study the differences between EM MNEs and AM MNEs to determine whether EM MNEs are able to deal better with having a broad scope than AM MNEs do.
Lastly, future research can also study the effect of other kinds of distances. The three distances covered in this research are three of the most commonly used measures of distance, but other frameworks also describe other measures of distance. For example, Ghemawat (2007) also described economic distance as an important factor. Future studies could study the effects of these other kinds of distance and investigate whether these have a more significant impact on firm performance for EM MNEs or not.
4.4. Conclusion
5. Bibliography
Ambos, T. C., & Ambos, B. 2009. The impact of distance on knowledge transfer effectiveness in multinational corporations.
Journal of International Management,
15(1): 1-14.
Barkema, H. G., Bell, J. H., & Pennings, J. M. 1996. Foreign entry, cultural barriers, and learning. Strategic management journal, 17(2): 151-166.
Barney, J. B. 2000. Firm resources and sustained competitive advantage, Economics Meets
Sociology in Strategic Management:
203-227: Emerald Group Publishing Limited. Beckerman, W. 1956. Distance and the pattern of
intra-European trade. The review of
Economics and Statistics, 38(1): 31-40.
Bodnar, G. M., Tang, C., & Weintrop, J. 1997. Both sides of corporate diversification: The value impacts of geographic and industrial diversification: National Bureau of Economic Research.
Bolaji, H., & Chris, A. 2014. Relationship between internationalisation of firms and economic performance: A case study selected banks in Nigeria. Journal of Economics and
Sustainable Development, 5(5): 160-166.
Buckley, P. J., Clegg, L. J., Cross, A., Liu, X., Voss, H., & Zheng, P. 2010. The determinants of Chinese outward foreign direct investment,
Foreign Direct Investment, China and the World Economy: 81-118: Springer.
Buckley, P. J., & Ghauri, P. N. 1999. The internalisation of the firm, London: International Thomson Business Press. Cantwell, J. 1994. The theory of technological
competence and its application to international production. Transnational
Corporations and Innovatory Activities,
17: 107.
Caves, R. E., & Caves, R. E. 1996. Multinational
enterprise and economic analysis:
Cambridge university press.
Chan Kim, W., Hwang, P., & Burgers, W. P. 1989. Global diversification strategy and corporate profit performance. Strategic
management journal, 10(1): 45-57.
Chang, S. J. 1995. International expansion strategy of Japanese firms: Capability building through sequential entry. Academy of
Management journal, 38(2): 383-407.
Chen, T. J. 2003. Network resources for
electronics firms. Journal of Management
Studies, 40(5): 1107-1130.
Chen, V. Z., Li, J., & Shapiro, D. M. 2012. International reverse spillover effects on parent firms: Evidences from emerging-market MNEs in developed emerging-markets.
European Management Journal, 30(3):
204-218.
Child, J., & Rodrigues, S. B. 2005. The Internationalization of Chinese Firms: A Case for Theoretical Extension? 1.
Management and organization review,
1(3): 381-410.
Chui, A. C., Lloyd, A. E., & Kwok, C. C. 2002. The determination of capital structure: is national culture a missing piece to the puzzle? Journal of international business
studies, 33(1): 99-127.
Cuervo-Cazurra, A., & Genc, M. 2008. Transforming disadvantages into advantages: developing-country MNEs in the least developed countries. Journal of
international business studies, 39(6):
957-979.
Dellestrand, H., & Kappen, P. 2012. The effects of spatial and contextual factors on headquarters resource allocation to MNE subsidiaries. Journal of International
Business Studies, 43(3): 219-243.
Deng, P. 2009. Why do Chinese firms tend to acquire strategic assets in international expansion?
Journal of World Business, 44(1): 74-84.
Denis, D. J., Denis, D. K., & Yost, K. 2002. Global diversification, industrial diversification, and firm value. The journal of Finance, 57(5): 1951-1979.
Doukas, J., & Travlos, N. G. 1988. The effect of corporate multinationalism on shareholders' wealth: Evidence from international acquisitions. The Journal of
finance, 43(5): 1161-1175.
Dow, D., & Larimo, J. 2009. Challenging the conceptualization and measurement of distance and international experience in entry mode choice research. Journal of
International Marketing, 17(2): 74-98.
Dunning, J. H. 1981. International production and the multinational enterprise London. George,
Allen and Irwin.
Eden, L., & Miller, S. R. 2004. Distance matters: Liability of foreignness, institutional distance and ownership strategy, "
Theories of the Multinational Enterprise: Diversity, Complexity and Relevance":
187-221: Emerald Group Publishing Limited.
Fladmoe-Lindquist, K. 1992. Resource-based
strategy and competitive advantage among multinationals: Center for International Business Education and Research, University of Utah ….
Freund, C. L., & Weinhold, D. 2004. The effect of the Internet on international trade. Journal
of international economics, 62(1):
171-189.
Garcı́a-Canal, E., Duarte, C. L., Criado, J. R., & Llaneza, A. V. 2002. Accelerating international expansion through global alliances: A typology of cooperative strategies. Journal of World Business, 37(2): 91-107.
García‐Canal, E., & Guillén, M. F. 2008. Risk and the strategy of foreign location choice in regulated industries. Strategic Management Journal, 29(10): 1097-1115.
Ghemawat, P. 2001. Distance still matters. Harvard
business review, 79(8): 137-147.
Ghemawat, P. 2007. Differences across countries: the CAGE distance framework. Harvard
Business School Press, Redefining Global Strategy: Crossing Borders in a World Where Differences Still Matter, Boston, USA: 8-10.
Ghemawat, P., & Khanna, T. 1998. The nature of diversified business groups: A research design and two case studies. The Journal
of Industrial Economics, 46(1): 35-61.
Ghoshal, S. 1987. Global strategy: An organizing framework. Strategic management journal, 8(5): 425-440.
Ghoshal, S., & Bartlett, C. A. 1990. The multinational corporation as an interorganizational network. Academy of
management review, 15(4): 603-626.
Gibson, C. B. 1999. Do they do what they believe they can? Group efficacy and group effectiveness across tasks and cultures.
Academy of Management Journal, 42(2):
138-152.
Goerzen, A., & Beamish, P. W. 2003. Geographic scope and multinational enterprise performance. Strategic Management Journal, 24(13): 1289-1306.
Goldstein, A. 2007. Multinational companies from
emerging economies: composition, conceptualization and direction in the global economy: Springer.
Goldszmidt, R. G. B., Brito, L. A. L., & de Vasconcelos, F. C. 2011. Country effect on firm performance: A multilevel approach.
Journal of Business Research, 64(3):
273-279.
Gomez-Mejia, L. R., & Palich, L. E. 1997. Cultural diversity and the performance of multinational firms. Journal of International Business Studies, 28(2):
309-335.
Grant, R. M. 2002. The knowledge-based view of the firm. The strategic management of
intellectual capital and organizational knowledge, 17(2): 133-148.
Greve, H. R. 2008. A behavioral theory of firm growth: Sequential attention to size and performance goals. Academy of Management Journal, 51(3): 476-494.
Guillén, M., & Guillén, M. F. 2005. The rise of
Spanish multinationals: European business in the global economy:
Cambridge University Press.
Guillen, M. F. 2000. Business groups in emerging economies: A resource-based view.
academy of Management Journal, 43(3):
362-380.
Guillén, M. F., & García-Canal, E. 2009. The American model of the multinational firm and the “new” multinationals from emerging economies. Academy of Management Perspectives, 23(2): 23-35.
Harris, M., Kriebel, C. H., & Raviv, A. 1982. Asymmetric information, incentives and intrafirm resource allocation. Management
science, 28(6): 604-620.
Hennart, J.-F., & Larimo, J. 1998. The impact of culture on the strategy of multinational enterprises: does national origin affect ownership decisions? Journal of international business studies, 29(3):
515-538.
Hitt, M. A., Hoskisson, R. E., & Kim, H. 1997. International diversification: Effects on innovation and firm performance in product-diversified firms. Academy of
Management journal, 40(4): 767-798.
Hitt, M. A., & Ireland, R. D. 1985. Corporate distinctive competence, strategy, industry and performance. Strategic management
