The Relationship between Internationalization and Firm Performance

Title: The Relationship between Internationalization and Firm Performance Seminar date: 5 June, 2008 Course: Masters thesis in Business Administration, Programme for Managing People, Knowledge and Change, 15 University Credit Points (15 ECTS). Authors: Cheng Hsun Chiang and Márton Pap Advisor: Dan Kärreman Key words: Internationalization, Performance, Multinationality, Degree of Internationalization (DOI), Country of Origin Purpose: To illuminate various crucial aspects of internationalization by systematically contrasting the different models of the multinationality-performance relationship and searching for underlying reasons. Methodology: Meta-analysis on previous theoretical and empirical research. Our emphasis in this paper has been put on the qualitative aspects of the previous research unlike many other conventional meta-analyses that focus on the comparison of the empirical data. Theoretical perspectives: Five main models have been developed by earlier studies to describe the relationship between internationalization and performance: positive linear, no or ambiguous relation, inverted U-shaped, standard U-shaped and S-shaped curve. In this paper, we have identified six areas that reveal valuable learning points about multinationality and performance: the conceptualization and measurement of internationalization and corporate performance, the control variables applied in the research, the investigated time period, the country of origin and the relation with product diversification. Empirical foundation: We have not conducted an empirical research. Instead, we have synthesised the empirical studies of 13 articles. Conclusions: There is no generally applicable model to describe the relationship between internationalization and performance. There are a number of factors that influence this relationship and each company has an idiosyncratic position in the matrix of the factors. Knowing these factors can help managers in the strategic planning of the international development of their companies