Management International Review

, Volume 47, Issue 3, pp 453–475 | Cite as

Is international business good for companies? The evolutionary or multi-stage theory of internationalization vs. the transaction cost perspective

  • Farok J. Contractor


Abstract and Key Results
  • This paper’s objective is to articulate, more precisely than has occurred in the past, the principal theory rationales underlying the Multinationality/Performance (M/P) link, by examining each claim for the negative or positive benefits of internationalization, from the lens of the theory of the firm and the multinational enterprise. A concurrent objective of this paper is to respond to critiques of M/P theory and discuss methodology and operationalization problems in empirical testing.

  • While international expansion of a firm will not necessarily always improve performance (during the initial international expansion stage, or in cases where a firm may have over-internationalized), for the most part, over the considerable middle range of expansion, net positive benefits accrue from internationalization. Underlying theory rationales are detailed in the paper.

  • The results of over one hundred empirical studies over the past 30 years appear, on superficial examination, to be contradictory, but can be reconciled by the recently proposed 3-stage or S-shaped general theory.

Key Words

General Theory Multinationality-Performance Relationship Past Empirical Results 


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Copyright information

© Gabler Verlag 2007

Authors and Affiliations

  • Farok J. Contractor
    • 1
  1. 1.Management and Global BusinessRutgers UniversityNewarkUSA

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