The Internationalization-Performance Relationship at Swiss Firms: A Test of the S-Shape and Extreme Degrees of Internationalization

Zusammenfassung

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Researchers have recently suggested that on average the relationship between internationalization and performance will be S-shaped. In this study, the researchers test this pattern investigating 87 Swiss multinational companies in manufacturing industries over an 8-year period. Large Swiss companies cover the full range of internationalization, with many measuring over 90% foreign sales-to-total sales. This allows for a unique test of performance levels at very high degrees of internationalization. They find that in the case of Swiss MNCs the S-curve is shifted to the right, and preceded by an initial stage of increasing performance. They find that companies operating at extreme (very high) degrees of internationalization face lower average performance and higher average performance variation.

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The Internationalization-Performance Relationship at Swiss Firms: A Test of the S-Shape and Extreme Degrees of Internationalization

Introduction

The question of whether and how internationalization impacts firm performance is one of the most addressed research problems in the international management field (Werner 2002). To date, close to a hundred investigations of this linkage have been undertaken worldwide. Unfortunately, the findings generated by this research stream have been inconclusive and contradictory (Annavarjula/Beldona 2000, Capar/Kotabe 2003, Contractor/Kundu/Hsu 2003, Ruigrok/Wagner 2003, Sullivan 1994).

Initially, researchers addressed and occasionally found evidence in support of a positive linear form (e.g. Grant 1987). Inconclusive results led researchers to consider the non-linearity hypothesis (Sullivan 1994): if a non-linear curve best reflects the internationalization-performance relationship, linear regressions provide misleading findings. Over the past decade, researchers applying quadratic estimation models found evidence in support of a U-shaped form (Capar/Kotabe 2003, Ruigrok/Wagner 2003), as well as an inverted U-shaped form (Geringer/Beamish/ daCosta 1989, Gomes/Ramaswamy 1999, Hitt/Hoskisson/Kim 1997).

More recently, researchers have aimed at reconciling research findings and proposed that on average a horizontal-S curve best describes the internationalizationperformance relationship (Contractor/Kundu/Hsu 2003, Lu/Beamish 2004, RiahiBelkaoui 1998). According to this three-stage model, multinational companies (MNCs) experience a performance downturn at low degrees of foreign expansion, increasing performance levels at moderate degrees of internationalization (DOIs), and eventually a second and final performance downturn at high DOIs. The inflection point between the second and third stage has been referred to as the "internationalization threshold" (Geringer/Beamish/daCosta 1989). Beyond this point the incremental costs of internationalization will begin outweighing the incremental benefits of internationalization. The academic implication of this is that while companies may cover a broader spectrum of DOIs, performance pre...

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