The impact of home-country conditions and geographical diversification on the domestic productivity of telecom multinationals

Abstract

Purpose Previous work in international business largely disregards the interplay between home-country conditions and firms’ geographical diversification – implying that, regardless of indigenous conditions, firms can modify their domestic performance (which the authors measure in terms of change in firms’ domestic productivity) merely by diversifying into international markets. The authors contest this view and argue that diversification does not substitute for home-country conditions. Rather, it moderates the baseline impact of home-country conditions on indigenous firms’ domestic performance. The purpose of this study is to describe these mechanisms and empirically examine their implications for indigenous firms’ performance. Design/methodology/approach The authors investigate the above model based on a 20-year longitudinal analysis of 600 observations involving telecommunication incumbents from 65 countries. They control for possible reverse causality between firms’ international diversification (and other firm-specific factors) and their domestic performance, and conduct several robustness checks. Findings The authors find – as hypothesized – that international diversification moderates the baseline performance impact of different home-country attributes in different ways. Such diversification does not have a uniform moderating effect on home-country attributes. In other words, the baseline effects of home-country conditions are altered as indigenous firms become more internationalized. Originality/value Theoretically, this work bridges the micro- and macro-level arguments that interweave strands from the competitive strategy and national competitive advantage literatures. By unpacking diversification’s role vis-à-vis the effect of upstream (home-country) conditions on firm performance, the authors attempt to shed light on the mechanisms that help (or hinder) indigenous firms’ performance. Empirically, this study helps to reconcile seemingly opposite views about whether and, if so, how much home-country conditions shape indigenous firms’ expansion after they have diversified internationally.

International diversification, legitimacy, and corporate social performance of extractive industry multinationals

“…These categories track performance and progress on two broad policy objectives: environmental health and ecosystem vitality. We expect EPI to affect the social and EP of EIMs associated with the initial conditions of the country of origin (Symeou & Merchant, 2019) as well as the host country constituents' expectations of CSP.…”

“…Second, the extent of the legitimacy pressures an MNC faces may be influenced by its country of origin. Even when an MNC diversifies internationally, country‐of‐origin effects persist (Marano et al, 2017; Symeou & Merchant, 2019; Zhou & Guillén, 2015). Extant research also suggests that the most significant country of origin dimension to consider is its level of development.…”

Politics, rumors and identity: how does a domestic firm challenge an MNE in the non-market environment amidst home–host political hostility?

“…The MNE, through interacting with home institutions over time, could establish firm-specific capabilities in areas like research and development (R&D) (Un, 2011), manufacturing productivity (Symeou and Merchant, 2019) and corporate social responsibility (CSR) (Graafland and Noorderhaven, 2020). Surely not every MNE can benefit equally from home institutions – only those capable of leveraging institutional benefits can create firm-specific advantages of foreignness (Landau et al , 2016).…”