Theory suggests and results show that firm performance is initially positive but eventually levels off and becomes negative as international diversification increases. Product diversification moder...

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International Diversification: Effects on Innovation and Firm Performance in Product-Diversified Firms

We discuss and explore the effects of internationalization, an entrepreneurial strategy employed by small and medium-sized enterprises (SMEs), on firm performance. Using concepts derived from the international business and entrepreneurship literatures, we develop four hypotheses that relate the extent of foreign direct investment (FDI) and exporting activity, and the relative use of alliances, to the corporate performance of internationalizing SMEs. Using a sample of 164 Japanese SMEs to test these hypotheses, we find that the positive impact of internationalization on performance extends primarily from the extent of a firm's FDI activity. We also find evidence consistent with the perspective that firms face a liability of foreignness. When firms first begin FDI activity, profitability declines, but greater levels of FDI are associated with higher performance. Exporting moderates the relationship FDI has with performance, as pursuing a strategy of high exporting concurrent with high FDI is less profitable than one that involves lower levels of exports when FDI levels are high. Finally, we find that alliances with partners with local knowledge can be an effective strategy to overcome the deficiencies SMEs face in resources and capabilities, when they expand into international markets. Copyright © 2001 John Wiley & Sons, Ltd.

The internationalization and performance of SMEs

Why are some small and medium-sized enterprises (SMEs) more successful in selling outside their domestic markets than are other SMEs in the same industry? Although the traditional explanation is that firms can gain valuable knowledge and resources as they become older and larger, small and young firms are not necessarily disadvantaged if they develop other mechanisms to acquire the requisite knowledge and resources. We examine the role of the management team's international experience as such a mechanism, for the internationalization of Canadian software product firms. We show that internationally experienced management teams have a greater propensity to develop foreign strategic partners and to delay less in obtaining foreign sales after start-up, and that these behaviors are associated with a higher degree of internationalization.

https://link.springer.com/content/pdf/10.1057%2Fpalgrave.jibs.8490120.pdf

The Influence of the Management Team's International Experience on the Internationalization Behaviors of SMES

It is generally assumed that the performance of a firm improves with greater multinationality. Yet recent empirical studies have shown both a U-shaped relationship (which suggests an initially negative effect of international expansion on performance, before the positive returns of international expansion are realized) and an inverted-U-shaped relationship (which suggests that international expansion beyond an optimal level is again detrimental to performance, and results in a negative slope). This paper proposes a new unified three-stage theory of international expansion that incorporates both concepts in a sigmoid hypothesis. It then tests this on data from 11 service industries, highlighting the difference between knowledge-based and capital-intensive service sectors.

https://papers.ssrn.com/sol3/Delivery.cfm/palgrave_jibs_8400003.pdf?abstractid=1809435&mirid=1

A three-stage theory of international expansion: the link between multinationality and performance in the service sector

International corporate entrepreneurship and firm performance - The moderating effect of international environmental hostility

Sullivan's [1994] suggestion that an index measure of the internationalization construct is superior to single-variable measures is critiqued on psychometric, content validity, criterion validity, reliability, and utilitarian grounds. We argue that internationalization is more complex than envisioned by this index and suggest that further refinement of the construct is necessary before constructing indices.

https://link.springer.com/content/pdf/10.1057%2Fpalgrave.jibs.8490131.pdf

Measuring the Degree of Internationalization of a firm: A Comment

Retailers in South Texas border cities were surveyed to determine the impact of the December 1994 Mexican peso devaluation on their sales and retailing mix strategies. Results indicate that sales consequences are strong, averaging a 41.8 percent decline, but vary by city, store type, distance from the border, and relative domestic market size. Adjustments to the retailing mix were primarily defensive in nature, aimed predominantely at reducing costs and conserving cash. Proactive changes to retain or increase business were limited. Reducing prices was the dominant aggressive tactic employed. Public policy initiatives are consistently seen as having a positive impact on the situation. Research results provide limited support for Clark's (1994) theory describing the impact of national boundaries on firm marketing strategies. The importance of relative distance from the border and relative market size is confirmed. The hypothesized consequences for firm level marketing strategies were not observed, ...

The effects of the peso devaluation on cross‐border retailing

Reports that transfer of ownership from government to private hands is touted as the only way to eliminate inefficiencies in the public sector. Argues that the alternative approach ‐ increasing competitive intensity through decontrol of restricted industries without changing ownership to private investors ‐ is likely to provide similar efficiency gains. Examines this hypothesis empirically in the context of state‐owned manufacturing enterprises in India that face effective competition from private sector firms. Shows, from analysis of variance of efficiency indicators of a longitudinal sample of 108 firms over the period 1988‐1992, that increasing levels of competition trigger corresponding increases in the overall level of technical efficiency of state‐owned enterprises that face competitive conditions. Provides a persuasive case for introducing competitive markets as an alternative to complete privatization, especially in monopolisitc settings.

Competitive intensity and technical efficiency in public sector firms: evidence from India

This paper reports findings from a study comparing the performance of Indian State Owned Enterprises (SOEs) and private firms. While the privately held firms performed better in terms of commercial...

William Renforth

Papers

Measuring the Degree of Internationalization of a firm: A Comment

The effects of the peso devaluation on cross‐border retailing

Competitive intensity and technical efficiency in public sector firms: evidence from India

Evaluating the comparative performance of state owned enterprises and privately owned firms: the indian experience.