Multinationality, R&D Intensity, and Firm Performance: Evidence from U.S. Manufacturing Firms

Abstract

We examine whether firms’ multinationality leads to better performance and what the role of R&D investment is in the multinationality performance linkage. Unlike the previous studies, we employ both accounting‐ and market‐based measures of firm performance for a large sample of U.S. manufacturing firms. Our results show that the empirical relation between multinationality and performance is not monotonic but varies with the phase of a firm’s multinationality, starting with a negative relation initially, followed by a positive one, and then again a negative one. This horizontal S‐shaped curvilinear relation of multinationality is more pronounced for the market‐based performance measure and is supportive of the three‐stage theory of internationalization. We also find that a firm’s multinationality is related to greater firm performance when the firm possesses R&D investment, and that the effect of R&D increases with the extent of a firm’s multinationality. These results lend strong support for the Internalization theory and the resource‐based view of firms’ international expansion. Our results are robust to different model specifications with an alternative measure of multinationality.

R&D spending value effect research of China’s listed manufacturing companies

“…Moreover, the regression results confirm several scholars' research on American listed companies [1].…”

“…Lots of literatures confirmed that the R&D expenditure showed a positive correlation with the market value of listed companies [1]. However, some empirical evidence didn't support the positive correlation between them.…”

A theoretical assessment of the empirical literature on the impact of multinationality on performance

“…Some researchers have uncovered a positive linear relationship between multinationality and performance (e.g., Kim and Lyn, 1986), some a negative linear one (e.g., Click and Harrison, 2000), and still others have found that some specifications showed no relationship whatsoever (e.g., Tallman and Li, 1996;Qian, 2002). In response to these inconclusive results, researchers have experimented with nonlinear relationships, but here again the results have been inconsistent and contradictory, with some finding a U-shaped relationship (e.g., Capar and Kotabe, 2003), others an inverted U-shaped relationship (e.g., Li and Qian, 2005) and a third group a sigmoid one (Contractor, Kundu, and Hsu, 2003;Lu and Beamish, 2004;Bae, Park, and Wang, 2008). In the words of Osegowitsch and Zalan (2005: 8), 'the only conclusive verdict that can be reached is that M/P results are truly inconclusive.…”

An Empirical Analysis of the Internationalization‐Performance Relationship Across Emerging Market Firms

“…Second, a fi rm's operational risk is also increased in three significant ways with international operations. These are risks due to changing political situations in the host countries, fluctuations in currency exchange values (Bae and Jain, 2002), and managerial mistakes due to liability of foreignness (Hymer, 1976;Lu and Beamish, 2005).…”