A contingency theory of internationalization performance for emerging market multinational enterprises.

Zusammenfassung

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RESEARCH ARTICLE

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A contingency theory of internationalization performance for emerging market multinational enterprises.

Abstract:

* Studies of the internationalization-performance (I-P) relationship for emerging market multinational enterprises (EM MNEs) have yielded mixed results, suggesting that a contingency view of I-P for EM MNEs may be useful and timely. In particular, we suggest it is useful to analyze how the EMs' trade liberalization can amplify or reduce the performance from foreign market penetration in the context of electronics vs. non-electronics EM MNEs.

* Our framework suggests the I-P link is inverted-U shaped for electronics EM MNEs and linear for non-electronics EM MNEs. These relationships are further enhanced with higher trade liberalization. Our empirical tests with seven related measures of trade liberalization on a sample of 623 MNEs from 14 EMs for 2000-2006 largely support our theory.

* Our article integrates and contributes to two small, growing, and related literatures: (1) the I-P relationship for EM MNEs per se; and (2) the effect of trade liberalization on firms' internationalization. We conclude with fresh implications for theory, policy, and practice.

Keywords: Contingency theory * Multi-stage theory of internationalization * EM MNEs * Internationalization * Trade liberalization * Performance * Electronics industry

Introduction

Recent research on how internationalization--the degree to which firms depend on foreign markets, their foreign market penetration in terms of sales revenues (Elango and Pattnaik 2007; Li 2005); Thomas and Eden 2004)--affects EM MNEs' financial performance has yielded mixed results. In this study, we delve deeper into these empirically inconsistent results and suggest that a contingency perspective on the I-P link for EM MNEs may be useful to help explain the prior mixed results, and provide a step toward establishing an improved theoretical foundation for the I-P link specifically in the context ofEM MNEs.

Indeed, EMs are not alike. Among the many dimensions on which EMs can differ (e.g., see Hoskisson et al. 2000; Pillania 2009 for a fuller discussion), an important characteristic is the EMs' degree of trade liberalization; i.e., the size of the EM's trade sector relative to the economy. Higher trade liberalization involves increased integration into world markets, resulting in greater volume of trade in terms of exports and imports, and in capital flows such as inward and outward foreign direct investment (FDI). The implication of this country-level policy for firm-level I-P strategy is that EM MNEs based in countries more open to international trade should benefit more from internationalization than their counterparts based in countries less open to trade. However, this possible moderating effect of trade liberalization on EM MNEs' I-P relationship has been under-analyzed in the literature.

Additionally, in many EMs, the local government promotes certain industries as "national champion(s)" (Nohara and Verdier 2001) and "encouraged" industries (Walton 2010), attempting to help them attain global competitiveness and success. This is particularly the case with the electronics industry in many EMs, described in greater detail later in this study. Successful foreign competition by such national champions involves developing advanced technology products, conducting efficient manufacturing and global marketing, and developing global brands, all of which help raise firms' profits. The major implication from this government support of the electronics industry for firm-level I-P strategy is that EM MNEs operating in the electronics industry should benefit more from internationalization than their non-electronics counterparts. Thus, from an I-P theory perspective, we should not expect a similar I-P relationship for EM MNEs operating in the electronics and non-electronics sectors (i.e., industries considered more traditional for EMs, such as manufacturing, agriculture, trade, mining and construction, and the like, which have not been the main focus of the EM governments' promotion). However, this possible differentiation between the electronics and non-electronics contexts has also remained under-studied. Hence, we seek to bridge this gap by analyzing how trade liberalization affects the I-P link for EM MNEs in the electronics vs. non-electronics contexts. In doing so, we aim to make the following contributions.

First, we suggest that it is useful to integrate the theoretical predictions from the I-P literature of EM MNEs with those from the macro-economics literature on trade liberalization of MNEs. There have been few studies that have included trade liberalization per se in the context of multi-country EM samples, and its effect on firm strategy-performance link. Hence, we build on the precepts of Transactions Cost Economics (TCE) (Williamson 1985), multi-stage "general" theory of internationalization (Contractor 2007; Contractor et al. 2003), and new trade theory (Gereffi 1999; Krueger 1997; Rodrik 1997) to advance our contingency theoretical framewor...

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