Internationalization and performance: the role of depth and breadth

Abstract

Purpose The purpose of this paper is to analyze the relationship between multinationality and firm performance (M-P) in Latin American companies, commonly referred to as multilatinas. The study conceptualizes the depth (intensity) and breadth (geographical scope) of internationalization and examines their effect on financial performance. Although scholars have studied how internationalization in various contexts and industries affects performance, little is known about firms in Latin America. Design/methodology/approach The authors conducted an analysis of the effect of the depth and breadth of multilatina internationalization on financial performance by creating a database using information from America Economia, a specialized Chilean magazine that publishes an annual ranking of multilatinas. Additional data came from the Osiris database of Bureau Van Dijk and Compustat. The hypotheses were tested using an autoregressive heteroskedastic model. Findings The results show that the extent of the depth and breadth of internationalization affects financial performance. Multilatinas’ depth of internationalization has a curvilinear (U-shaped) impact on performance while breadth has an inverted curvilinear impact on performance. Research limitations/implications The theory portion and results expand the literature on firm internationalization and performance by distinguishing between two types of international firm expansion, depth and breadth, and discussing how each contributes to different stages of the three-stage theory of multinationality and performance. Originality/value The findings indicate that multilatinas benefit from their regional expansion, but outside Latin America, expansion has a negative effect on financial performance. They also show that firms can implement different types of internationalization strategies in terms of intensity and scope to achieve better performance.

Qualitative Measure of the Degree of Internationalization: The Case of Huawei

“…In this regard, depth is measured by financial indicators, including foreign versus total sales, foreign versus total assets, and employees in foreign locations (Abdi & Aulakh, 2018;Brida et al, 2016;Sullivan, 1994). Likewise, breadth refers to the dispersion of offices, branches, and factories located abroad (Velez-Calle et al, 2018). An example of breadth is the number of subsidiaries that a mnc has abroad, the number of employees located in a foreign country, and the number of available rooms abroad (Brida et al, 2016).…”

“…One of the first to propose ways to measure doi was Vernon (1971), who proposes a measurement using quantitative indicators. Based on this, the most important measurement currently focuses on quantitative indicators and techniques (Mendoza et al, 2020;Sullivan, 1994;Velez-Calle et al, 2018). Thinking along these lines, the importance of this paper consists in proposing a new way of measuring doi through a qualitative technique of content analysis that will help clarify and deepen the doi topic.…”

Internacionalización de empresas latinas: evolución y tendencias

“…Countries (Cuervo-Cazurra & Dau, 2009). Internationalization and performance: the role of depth and breadth (vélez-Calle et al, 2018).…”

“…Entre el conjunto de las publicaciones bibliográficas abordadas, se destaca una perspectiva orientada a analizar la importancia de la estrategia y la diversificación, en el proceso de internacionalización de empresas latinoamericanas o de países emergentes. Donde factores como la capacidad para profundizar y ampliar el alcance en los mercados internacionales, se convierte en una estrategia que incide en el rendimiento financiero de las empresas latinoamericanas (vélez-Calle et al, 2018); además se plantea a partir de un estudio empírico en compañías multinacionales brasileñas, que el proceso de internacionalización también depende de la capacidad y estrategia de innovación de la empresa (Fleury, Leme & Mendes, 2013); También se aborda la incidencia de los costos de transacción en la estrategia para acceder a mercados exteriores, concluyendo que es más fácil desarrollar mercados regionales que mercados globales dado las restricciones que generan dichos costos de transacción (rugman & verbeke, 2004b).…”

Internationalization, Strategic Slack Resources, and Firm Performance: The Case Study of Vietnamese Enterprises

“…Previous studies have demonstrated a complex curvilinear relationship between the degree of internationalization (DOI) and performance. The DOI reflects a firm's exports to other countries (Hitt et al 1997;Velez-Calle et al 2018). Many previous studies have investigated the internationalization-performance relationship, with mixed empirical results: positive linear (Delios and Beamish 1999); negative linear (Denis et al 2002;Kim and Mathur 2008); no significant linkage (Majocchi and Zucchella 2003); inverted U-shaped (Elango 2006); U-shaped (Chen and Tan 2012); inverted S-shaped (Cho and Lee 2018); S-shaped (Ruigrok et al 2007); and U-shaped in large firms and W-shaped in small firms (Zhou 2018).…”