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0Only a few studies have investigated whether a firm's performance has an effect on its internationalization. These studies, focusing on actual firm performance, have suggested a resource-based argument and generally found non-significant results. 0In this paper, we argue that relative firm performance is critical in determining a firm's internationalization because it influences a firm's attitude toward risk-taking. We apply prospect theory to predict this relationship. 0Using time-series, cross-sectional analysis of 701 Japanese firms from 1993 to 1998, we uncovered an inverted-U shaped relationship between a firm's relative performance and its degree of internationalization using its historical performance target. As compared to the industry target, relative performance showed a positive impact on a firm's internationalization.

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The discovery in 2015 that car maker Volkswagen (VW) had installed "defeat devices" into its diesel engines to lower emissions during testing exposed a corporate scandal and resulted in a 40% drop in the company's share price in 2 weeks. Although industry analysts questioned whether VW would survive the fallout, its sales quickly rebounded, and in 2017 the firm was the world's largest auto manufacturer. Although this unexpected surge led some to say that the scandal had blown over, there are indicators that VW has not yet fully recovered from the affair, and several issues stemming from it remain to be resolved. An examination of several reports issued as the crisis unfolded highlights the impact on VW and offers lessons for the firm's leaders and public policy makers.

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