How Do We Capture 'Global Specialization' When Measuring Firms' Degree of Globalization?

Zusammenfassung

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The IB literature informs people of several ways to measure firms' degree of globalization. In this paper the researchers make the argument that in fact none of the existing indices really measure firms' degree of "global specialization", that is, to what extent their allocation of resources is multidomestic or global. In order to remedy this they introduce a complementary index measuring how firms are configuring their value chains -- whether they are replicating value chain activities from country to country or locating them in globally specialized units in order to exploit an international division of labor. They then test this "global specialization" index empirically on a sample of Danish MNCs. They find that the index is able to identify a distinct group of firms with significantly higher degrees of global value chain configuration. The firms in this group do not necessarily score high on conventionel internationalization measures.

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How Do We Capture 'Global Specialization' When Measuring Firms' Degree of Globalization?

Introduction

What is meant by the internationalization or globalization of firms and how do we measure the phenomenon? The questions have aroused the curiosity of most IB scholars, and the many different approaches found in the literature indicate that there are no simple answers. The measuring of firms' internationalization may have a phenomenalistic justification of its own (see e.g., Benito/Welch 1997), but usually, measurements are made in order to establish the interrelationship between firms' degree of internationalization and financial performance (see e.g., Stopford/ Dunning 1983,Daniels/Bracker 1989, Geringer et al. 1989). For that purpose, firms' foreign sales as percentage of their total sales have been widely used (Sullivan 1994), and - to a lesser extent - the proportion of foreign to total assets and of foreign to total employees (Geringer et al. 1989). Since these dichotomous (home vs. abroad) internationalization indices do not capture the spatial spread of the foreign activities, IB scholars (e.g., Ietto-Gillies 1998, Fisch/Oesterle 2003) have developed various spread/diversity indices to supplement dichotomous indices. In combination, the dichotomous and spread/diversity internationalization indices are good indicators of how expansive firms are in terms of generating revenue in foreign markets, and also in terms of measuring the magnitude of firms' international value added activity. Moreover, the data requirements of these types of measures are moderate: most often, researchers can compile the needed data from secondary sources, such as industry directories and annual reports.

However, the dichotomous and spread/diversity measures are of little help if one wants to establish to which degrees firms are following multidomestic or global strategies (Porter 1986, Prahalad/Doz 1987, Bartlett/Ghoshal 1989, Yip 1989). This is regrettable inasmuch as the integration/responsiveness discussion is pivotal in the current international management literature. The renewed interest in global sourcing and offshoring among international firms have further exposed the inadequacies of the dichotomous and spread/...

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