Is Regional Strategy More Effective Than Global Strategy in the Us Service Industries?1

Zusammenfassung

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This study examines performance implications of a firm's multinationality in the US service industries. It finds that home triad-based regional strategy is more effective than global strategy. It also partially supports the recently formalized three-stage proposition of international expansion. The whole sample analysis reveals a horizontal S-curved relationship between multinationality and financial performance. However, the sub-sample analyses show that the U-shaped relationship between multinationality and financial performance appears to be prevalent for US firms in the service industries of high R&D and low capital expenditure intensity. The home triad-region orientation has a consistently positive moderating effect on the relationship between multinationality and financial performance.

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Auszug

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Is Regional Strategy More Effective Than Global Strategy in the Us Service Industries?1

Introduction

The relationship between a firm's degree of multinationality and its performance (hereinafter referred to as M-P relationship) has been a core research issue in international management.2 Earlier studies showed that a firm's multinationality could be either positively or negatively or insignificantly associated with its performance (Vernon 1971, Siddharthan/Lall 1982, Michel/Shaked 1986, Grant 1987). However, recent research has consistently suggested that M-P relationship is non-monotonic (Daniel/Bracker 1989, Geringer/Beamish/DaCosta 1989, Ramas wamy 1995, Hitt/Hoskisson/Kim 1997, Gomes/Ramaswamy 1999, Lu/ Beamish 2001, Contractor/Kundu/Hsu 2003).

The central attention has now shifted to what kind of nonlinear curve delineates M-P relationship best. Some scholars embraced the Uppsala incremental internationalization model (Johanson/Vahlne 1977, 1990) in conjunction with Coasian transaction cost theory. They argued that firms would readily benefit from economies of scale, scope, and locations if they undertake their initial international expansion in a relatively homogeneous (i.e., institutionally and culturally proximate) business environment. Only when the firms enter distinctively different markets later on, would their performance be compromised because the increased environmental diversity and required organizational complexity would escalate corporate administrative costs. The empirical studies of these scholars showed that M-P relationship exhibited an inverted U-shaped curve (Daniel/ Bracker 1989, Geringer et al. 1989, Ramaswamy 1995, Gomes/Ramaswamy 1999).

Some other scholars, however, found a U-shaped M-P relationship (Ruigrok/ Wagner 2003, Lu/Beamish 2001). From an organizational learning perspective, they believed th...

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