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

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Abstract

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.

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Contractor, F.J. Is international business good for companies? The evolutionary or multi-stage theory of internationalization vs. the transaction cost perspective. MANAGE. INT. REV. 47, 453–475 (2007). https://doi.org/10.1007/s11575-007-0024-2

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