Revisiting the Internationalization-Performance Relationship: A Twenty-Year Meta-Analysis of Emerging Market Multinationals.

VerfasserWu, Sihong

1 Introduction

Multinational enterprises (MNEs), defined as firms with at least one-tenth of their sales distribution in foreign markets or holding a minimum of three foreign subsidiaries, are notable players in bridging commercial networks and connections between countries (Rugman, 1981; Rugman et al., 2016). A burgeoning literature has been devoted to explicating the performance implications of internationalization (Bausch & Krist, 2007; Cuervo-Cazurra et al., 2018; Glaum & Oesterle, 2007; Kirca et al., 2012), yet traditional arguments based on advanced market MNEs (AMNEs) are insufficient to explain those from emerging markets (EMNEs). In the past 20 years, IB researchers have gradually come to acknowledge that, unlike AMNEs, EMNEs behave in distinctive ways in internationalization, such as in regard to fast-paced springboard expansion (Luo & Tung, 2007), opaque networking (Buckley, 2018), and government-created advantages and interventions (Ramamurti & Hillemann, 2018; Rugman et al., 2016), which, implicitly or explicitly, are due to their home country's institutional idiosyncrasies. Although there has been a lively conversation on the internationalization and performance (I-P) of EMNEs, findings have not reached a consensus. The extant literature, based on differing emerging market contexts, has produced diversified and inconclusive linear relationships (positive or negative) (e.g., Holtbriigge & Berning, 2018; Liu et al., 2011), curvilinear relationships (U-shaped, inverted U-shaped, S-shaped, or M-shaped) (e.g., Hsu et al., 2013; Thomas, 2006; Xiao et al., 2019), or no significant relationships (Wan, 1998).

A widely accepted argument in EMNE research is associated with home-country government influences (Cuervo-Cazurra et al., 2018; Stoian & Mohr, 2016; Wei & Nguyen, 2020). One stream of research identifies the unique home government-created advantages (e.g., providing necessary information, loan access, grant subsidies, or assistance from the government agencies) that motivate and support EMNEs venturing abroad (Han et al., 2018; Holtbriigge & Berning, 2018; Lu et al., 2014; Rugman et al., 2016). The other stream captures negative influences of unfavourable home institutional environments on firm competitiveness, suggesting that the outward FDI by EMNEs is an escape strategy to deal with home-country institutional voids (Marano et al., 2017; Stoian & Mohr, 2016; Witt & Lewin, 2007). Despite extensive research effort, these contrasting views indicate that there is a need to assess home-government impacts on the I-P relationship in a more holistic way. Nevertheless, little in the literature considers how nationalism, defined as a sense of national superiority and a feeling that one's homeland should be dominant (Koster-man & Feshbach, 1989, p. 271), affects a firm's internationalization. Nationalism can fundamentally change the outward motivation and behaviours of MNEs, especially EMNEs that show a strong motivation to catch up, a spirit of collectivism, and are deeply embedded in their home-country institutional environments (Bobowik et al., 2014; Johnston, 2017; Rugman et al., 2016; Zhang & He, 2014). To fill the research gaps and advance the EMNE literature, this study has sought to answer the following question: How do home-country institutions matter in affecting the I-P relationship of EMNEs?

To address this question, we adopt a three-level meta-analysis to assess retrieved data on the I-P relationship, the influence of home-country governments, and the moderating effects of nationalism. We categorize dimensions of home-country governments discussed in the rich literature into a static aspect (government quality) versus a changing aspect (government transformability). First, home-country government quality refers to the perceived government ability to implement sound policies, enhance bureaucratic effectiveness, and provide credible commitments to socio-economic development policies (Rodriguez-Pose & Garcilazo, 2015). The extant literature suggests that government quality matters because it directly links with the degree of home institutional support for or intervention in EMNEs' internationalization (Han et al., 2018; Lu et al., 2014). Second, government transformability captures the extent to which the government is willing to convert political systems or learn to shift into a different regime for development needs (Deng & Zhang, 2018). Studies suggest that changes of political systems, as reflected by high government transformability, affect the environmental uncertainties of EMNEs' OFDI (Cuervo-Cazurra et al., 2018; Kim et al., 2010). Our systematic review process also identified a missing link in this research field, that is, the influence of EMNEs' national sentiment. We argue that nationalism, as an institution that reflects the individuals' attitudes toward protecting the national interest, moderates the government impacts on the I-P relationship through disturbing EMNEs' motivation and purposes of internationalization (Balabanis et al., 2001; Johnston, 2017).

Using an institutional-based perspective, this study elucidates the puzzle concerning the I-P relationship of EMNEs through a three-level meta-analysis. Our findings revealed that home-country government quality and transformability positively affect the I-P relationship of EMNEs, and the sense of nationalism negatively moderates government's impacts on the relationship. Overall, this study makes three contributions. First, findings contribute to resolving an ongoing debate in the EMNE literature by providing a more precise assessment of the I-P relationship of EMNEs. Second, although previous studies widely recognize that government quality exerts significant impacts on EMNEs (Han et al., 2018; Lu et al., 2014; Rugman et al., 2016), less attention has been devoted to the changing aspect of the governments. This study extends the institutional-based perspective by proposing a systemic conceptualization that considers both the static and changing aspects of the home-country government. Third, this study enriches insights of home-country institutional research by incorporating the effects of nationalism (Arikan & Shenkar, 2021; Contractor, 2021; Zhang & He, 2014). It echoes the recent calls for greater consideration of national sentiments in international business (IB) studies (Arikan & Shenkar, 2021; Contractor, 2021).

2 Literature Review

Considering the unique emerging market context and EMNEs' firm-specific assets (FSAs), IB scholars have sought to explore the I-P relationship in the past 20 years (see Appendix 1). Some studies focus on costs (e.g., liability of country of origin, liability of foreignness, market adaptation costs) and benefits (e.g., knowledge-seeking, experiential learning, economies of global scale) and discover a linear I-P relationship (Holtbrligge & Berning, 2018; Liu et al., 2011). Some take a step further to consider the complexity of international activities at different stages of EMNEs' internationalization and find curvilinear relationships (Hsu et al., 2013; Thomas, 2006; Xiao et al., 2019). The U-shaped relationship supporters suggest that costs will outweigh benefits in the early stage of internationalization but fall behind benefits in the mature stage (Chen & Tan, 2012; Gaur & Kumar, 2009). The inverted U-shaped advocates acknowledging that an optimal degree of internationalization exists, viz., the more EMNEs internationalize after reaching the threshold, the fewer the benefits they can gain (Chen & Hsu, 2010; Liu et al., 2011). The S-shaped defenders argue that firms will suffer loss in the initial stage of internationalization, then gain positive benefits in the mature stage, but eventually find internationalization difficult to manage when they are over-expanded (Chen et al., 2012). Some studies, however, find no significant evidence of the I-P relationship, arguing that it is the EMNEs' capabilities in cost efficiency rather than internationalization itself that impact on performance (Wan, 1998). While the linear arguments are challenged because of ignorance of phases of internationalization, scholars also criticize that curvilinear arguments are not theoretically convincing because the underlying assumptions may not occur (Nguyen, 2017; Wei & Nguyen, 2017, 2020).

In explaining the complexity of the I-P relationship in the context of EMNEs, a commonly adopted view is the institutional-based perspective (Deng & Zhang, 2018; Peng et al., 2008; Wei & Nguyen, 2017). On the one hand, host-country institutions, such as regulations, policies and institutional uncertainties, have received wide attention in IB literature, which reflects the EMNEs' resource-seeking efficiencies and costs of market adaptation in host countries (Demirbag et al., 2010; Rugman et al., 2014). In this vein, the I-P relationship deteriorates if there are conflicting goals between EMNEs and host-country institutions, since these conflicts hinder EMNEs from embedding in the local environment for the exploration of new business opportunities and FSAs development (e.g., Demirbag et al., 2010; Rugman et al., 2014). On the other hand, in contrast to AMNEs, EMNEs rely more on parent-centric approaches, which means that EMNEs are constantly affected by home-country institutional support or constraints in making their outward investment decisions, including target-country selection, mode and speed of entry, and ownership structure (Holtbriigge & Berning, 2018; Wei & Nguyen, 2017). Hence researchers conclude that it is important to consider institutional dimensions that are specific to a home-country context in understanding the internationalization of EMNEs (Yiu et al., 2007).

Through our literature review, we identified two important gaps that remain unaddressed. The first gap is that, although home-country institutional influences are discussed in IB literature, there is a lack of systemic conceptualization of the home...

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