Pace, rhythm, and scope: process dependence in building a profitable multinational corporation

Abstract

Many potential benefits of foreign expansion have been identified in the literature, yet empirical support that multinational firms perform better than domestic firms is mixed. This paper takes a longitudinal perspective and argues that how much a firm benefits from having foreign subsidiaries depends on its process of internationalization. We argue that a firm's capacity to absorb expansion is subject to constraints: some expansion patterns increase profitability less than others, owing to diseconomies of time compression. We hypothesize that the speed of internationalization, the spread of the geographical and product markets entered, and the irregularity of the expansion pattern negatively moderate a firm's increase in profitability resulting from international expansion. Model estimations based on panel data raised strong support for these predictions.

Internationalization trajectories--a cross-country comparison: Are large Chinese and Indian companies different?

“…This has also consequences for an assessment and an understanding of the degree to which national economies as a whole participate in the process of globalization. This paper aims to contribute to the understanding of the international expansion of firms over time, by building on the few studies that have taken a longitudinal perspective, notably Vermeulen and Barkema (2002), and Maitland et al (2005). Both groups of authors have developed measures to capture the dynamics in the internationalization process, using information on individual investment projects by subsidiaries.…”

“…Only a few recent studies (e.g. Maitland et al, 2005;Vermeulen and Barkema, 2002) have explicitly and empirically addressed how, at the corporate level, firms expand (and withdraw, see Benito and Welch, 1997) their international activities over time. Or, as Maitland et al (2005: 436) noted, there is still ' limited understanding of how the multinational enterprise (MNE) is created as an integrated system of strategically allocated resources, rather than a simple aggregation of discrete affiliate or country level decisions.'…”

“…Or, as Maitland et al (2005: 436) noted, there is still ' limited understanding of how the multinational enterprise (MNE) is created as an integrated system of strategically allocated resources, rather than a simple aggregation of discrete affiliate or country level decisions.' Especially, the lack of systematic, integrated and time-related empirical information on MNE strategies is an important omission, as there are indications that dynamic differences in the internationalization process and the resulting balance in sales and assets over time affect the extent to which firms are able to reap the benefits from or handle the risks of international expansion (Vermeulen and Barkema, 2002;Ruigrok and Wagner, 2003). In addition, a longitudinal analysis of growth across borders can shed light on the growth of the firm in general (Jones and Khanna, 2004;Penrose, 1959), and allows for a study of the various strategies that firms have used in driving economic globalization, hereby furthering our understanding of this prominent process (Rugman and Verbeke, 2004).…”

“…This paper aims to address this lacuna in existing research in general and in specific regarding the ways in which large Chinese and Indian firms expand their activities across borders over time by introducing the concept of internationalization trajectories. Building on Maitland et al (2005) and Vermeulen and Barkema (2002), internationalization trajectories are defined as distinct patterns over time with respect to the level, pace, variability, and temporal concentration of international expansion. The main research question of this paper is therefore whether the internationalization trajectories of large Chinese and Indian firms are different from those of large developed country firms.…”

Interdependence Across a Firm's International Trajectories

“…In this sense, the framework accommodates unidirectional (Johanson & Wiedersheim-Paul, 1975) as well as more convoluted international trajectories (Zander, 1997). Yet, each trajectory may follow distinct rhythms and paces (Vermeulen & Barkema, 2002), depending on the driving forces that act upon it (Barbosa, Rezende, & Versiani, 2014).…”