Resource indivisibility, lumpy costs and the multinationality–performance relationship

Purpose: The relationship between multinationality and firm performance is a central issue in the international marketing and business literatures. Predominantly, this body of research has tried to identify a single, generalized pattern for this relationship. However, despite the vast number of studies, results have been characterized as mixed or inconsistent. In this study, we take a fresh look at this relationship. Design/methodology/approach: We focus on a key inducement to expand firm multinationality – the search for a more efficient way to exploit firm resources, and also on a specific operationalization of multinationality – firm geographic scope. We use a formal analytical model analyzing the trade-off between benefits and costs arising from expanding firm geographic scope and emphasizing the role of lumpy costs emanating from resource indivisibility. Findings: The relationship between geographic scope and performance cannot be confined to a single pattern, but instead, may have any one of a set of patterns: negatively monotonic shape, inverted U-shape, S-shape, M-shape or, multiple-wave inverted U-shape. Practical implications: The current study offers managers some guidelines to identify which of the above patterns fits their firm's specific case, and to identify the optimal level of geographic scope for their firm. Originality/value: We conclude that the search for a single, generalized pattern for multinationality-performance is largely futile, whereas the focus on specific inducements and operationalizations for multinationality allows us to explain when and why specific patterns are more likely to occur.