Internationalization of Retail Banks: A Micro-Level Study of the Multinationality-Performance Relationship

Zusammenfassung

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This study discusses the underlying reasons for the variant nature of the relationship between multinationality and firm performance in the context of service firms. To date, this line of research has mostly used evidence from manufacturing firms, despite the ever-increasing contribution of service firms to national and global economies. We conduct an exploratory study using case analyses of large European retail banks. We argue that the nature of the multinationality-performance relationship for services is moderated by industry characteristics, market-based factors and firm-specific factors. We conclude that the shape of the curve depicting the multinationality-performance relationship of retail banks experiences substantial variations on a single case level. Our exploratory study of retail banks shows that the multinationality-performance relationship varies significantly depending on banks' strategic decisions regarding branch network configurations, product portfolios, branding strategies, organizational architecture (HQ-subsidiary relationship), and social networks. Any generalization of the relationship is difficult and prone to error.

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Auszug

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Internationalization of Retail Banks: A Micro-Level Study of the Multinationality-Performance Relationship

Introduction

The relationship between multinationality (degree of international expansion) and firm financial performance is a key issue in the internationalization literature and is important to international strategists (Glaum/Oesterle 2007). Over four decades of research in this area have led to different results, and scholars have only recently started to address the issue of these different, often conflicting findings (Ruigrok/Wagner 2005, Li/Goerzen/ Verbeke 2005). One avenue for future research in this area is the undertaking of microlevel studies designed to focus on the underlying reasons for the nature of the multinationality-performance (M-P) relationship (Hennart 2007), rather than on the shape of the curve depicting the M-P relationship. Other possible ways of strengthening M-P research are to explore the role of moderating factors (Bausch/Krist 2007) and to delve into unexplored territories, including industries other than manufacturing and firms that are not based in the US or the UK.

This paper touches upon these avenues by conducting an exploratory study of retail banks. The main contributions of our paper are a theoretical discussion of the effect of service characteristics (inseparability, heterogeneity, intangibility, and perishability) on the M-P relationship, and the identification of firm-level strategic initiatives that moderate such an effect in the context of retail banking.

Despite the phenomenal growth of its contribution to national and global economies (UNCTAD 2004)', the services sector has not been studied extensively by M-P researchers. Moreover, recent studies of M-P relationships in services show varied findings. Hitt et al. (2006) find a positive linear relationship in their study of US professional service firms (legal service providers). In a study of German service firms, Capar and Kotabe (2003) conclude that the curve depicting the M-P relationship is U-shaped, while Contractor, Kundu and Hsu (2003), using a much broader services data set, find that an S-shaped curve best represents the M-P relationship.

Some obvious reasons for such different findings are the choice of samples from different service sub-sectors (with different mixes of service characteristics and average internationalization levels) and the home-country environments of the selected firms. Additional explanations can be found in the roles of R&D and marketing (Kotabe/ Srinivasan/Aulakh 2002), the level of capital expenditure, and the "home triad-region orientation" of the ...

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