Pace, rhythm, and scope: process dependence in building a profitable multinational corporation

Many potential benefits of foreign expansion have been identified in the literature, yet empirical support that multinational firms perform better than domestic firms is mixed. This paper takes a longitudinal perspective and argues that how much a firm benefits from having foreign subsidiaries depen...

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Bibliographic Details
Published in:Strategic management journal 2002-07, Vol.23 (7), p.637-653
Main Authors: Vermeulen, Freek, Barkema, Harry
Format: Article
Language:English
Subjects:
Absorptive capacity
Applied sciences
Business management
Business strategies
Business structures
Competitive firms
Corporate strategies
Countries
development paths
Diseconomies
Enterprises
Exact sciences and technology
Expansion
Firm modelling
Foreign subsidiaries
Globalization
International business
international expansion
Internationalization
Management science
Marketing
Modeling
Multinational corporations
Multinational enterprises
Operational research and scientific management
Operational research. Management science
Profit
Profitability
Profitable firms
Strategic planning
Studies
Subsidiary companies
time compression diseconomies
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Summary:Many potential benefits of foreign expansion have been identified in the literature, yet empirical support that multinational firms perform better than domestic firms is mixed. This paper takes a longitudinal perspective and argues that how much a firm benefits from having foreign subsidiaries depends on its process of internationalization. We argue that a firm's capacity to absorb expansion is subject to constraints: some expansion patterns increase profitability less than others, owing to diseconomies of time compression. We hypothesize that the speed of internationalization, the spread of the geographical and product markets entered, and the irregularity of the expansion pattern negatively moderate a firm's increase in profitability resulting from international expansion. Model estimations based on panel data raised strong support for these predictions.
ISSN:0143-2095
1097-0266
DOI:10.1002/smj.243