Determinants of the Internationalization-Performance Relationship : An Empirical Examination of the Influence of Organizational and Contextual Variables

Ongoing globalization and the opening up of national markets have caused companies worldwide to continuously expand their international operations. However, the nature and direction of the link between increasing degrees of corporate internationalization and corporate performance still remains unclear. While the prevalent theoretical perspectives in the field of international business and management associate international expansion with a large variety of benefits, past empirical studies reveal an ambiguous picture of the internationalization-performance relationship showing positive and negative as well as linear and nonlinear associations between corporate internationalization and performance.This dissertation argues that the divergent findings of past empirical studies may be attributed to the use of simple bivariate models of the internationalization-performance relationship that stop short of exploring several other factors that could significantly alter the ability of international expansion to generate superior returns and therefore may be underspecified. Using multivariate regression analysis in a sample of U.S. and European multinational corporations (MNCs) in the pharmaceutical and food & beverage industries, it is shown that the link between internationalization and performance is not only context dependent but also significantly moderated by variables that relate to the management and organization of MNCs. In particular, the results provide empirical evidence that the internationalization-performance relationship is positively moderated by the use of intra-company knowledge flows and social control mechanisms. In addition, they also show that the strength of the relationship is significantly altered by the nature of the firm's value chain configuration.Thus, the results of this dissertation suggest that the relationship between corporate internationalization and performance is less uniform than may have been assumed. The presence of the significant moderating effects of both contextual and organizational variables also implies that an examination of the direct (main) effect of corporate internationalization on performance in isolation cannot predict performance outcomes reliably. Consequently, in future studies, simple bivariate models of the internationalization-performance relationship should be replaced by more complex multivariate models that include important moderating variables. In this respect, a fruitful area of future research may also be the identification of further moderating variables that relate to the implementation of international strategy.