Home Country Uncertainty and the Internationalization-Performance Relationship : Building an Uncertainty Management Capability

We analyze the impact of internationalization on firm performance in emerging economies, proposing that this relationship varies with home country uncertainty. Specifically, building on organizational learning theory and the institution-based view, we argue, first, that in emerging markets internationalized firms perform better than domestic firms. We then propose that this relationship is stronger for firms based in emerging countries with higher contextual uncertainty in the form of higher corruption and political risk. The reason is that by being exposed to high political risk and corruption at home, emerging market firms build an uncertainty management capability that helps them face the challenges of internationalization. We finally propose that firms perform better when they expand in the nearby region, but the uncertainty management capability has a higher impact when they expand outside their home region