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Multinational corporation internationalization in the service sector: a study of Japanese trading companies

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Abstract

This paper extends Chang's (1995) sequential investment theory to include multinational corporations (MNCs) in service industries, given this sector's large and growing impact on the global economy. To facilitate an examination of service MNC internationalization patterns, we develop a new typology of service investment (i.e., core-global, related-local, unrelated-global, and unrelated-local) based on business relatedness and location-specificity. We test this typology on a sample of large Japanese trading companies; our results suggest that the initial investments of service MNCs are closely related to their core businesses and are less location-specific, but that subsequent investments are less related to firms' core services and are more location-specific – a pattern similar to the traditional view on manufacturing MNCs. We extend our analysis to examine several case studies to provide a richer context for these findings. In addition, we examine the performance implications of internationalization. Our findings suggest that firms that internationalize through early investments that are closely related to their core activities outperform those in unrelated businesses over time, but that this performance gap between related and unrelated foreign investments diminishes in more advanced stages of internationalization.

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Notes

  1. Firms with large resources may take larger internationalization steps, stable and homogeneous markets may allow the accumulation of knowledge other than through direct experience, and knowledge gained with some markets may be generalized to others without direct experience.

  2. Since we have 22 lines of services in total in our sample, F i in the total sample is 231 (i.e., (22 × 22−22)/2=231). F i varies across the firms and the locations, depending on the number of the lines of services observed.

  3. The classification of DCs and LDCs is based on the United Nations Systems of Country Classification. DCs include countries in Western Europe, North America, and Oceania (Australia and New Zealand).

  4. To conserve space, the detailed results are not presented here but are available from the authors upon request.

  5. Nucor Steel's senior management, for example, have for many years stated that their capital-intensive firm's competitive advantages are based on intangible assets.

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Acknowledgements

The authors would like to thank the three anonymous JIBS reviewers for their helpful critiques of the various versions of our paper, as well as our Departmental Editor, Henk Volberda, for his guidance through this process.

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Authors and Affiliations

  1. University of Victoria, Victoria, British Columbia, Canada

    Anthony Goerzen

  2. Department of Management, The Chinese University of Hong Kong, Shatin, NT, Hong Kong

    Shige Makino

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  1. Anthony Goerzen
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  2. Shige Makino
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Correspondence to Anthony Goerzen.

Additional information

Accepted by Thomas Hutzschenreuter, Torben Pedersen and Henk Volberda, Guest Editors, 8 June 2007. This paper has been with the authors for two revisions.

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Goerzen, A., Makino, S. Multinational corporation internationalization in the service sector: a study of Japanese trading companies. J Int Bus Stud 38, 1149–1169 (2007). https://doi.org/10.1057/palgrave.jibs.8400310

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  • DOI: https://doi.org/10.1057/palgrave.jibs.8400310

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