Is international business good for companies? The evolutionary or multi-stage theory of internationalization vs. the transaction cost perspective
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 WordsGeneral Theory Multinationality-Performance Relationship Past Empirical Results
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