A study of the relationship between the characteristics of internationalization course and performance: the degree, velocity, and rhythm of internationalization
Authors: Kuo-Pin Yang; Po-Young Chu; Shao-Tzu Wang
Journal: Chia Da Manaement Review. Jun. 2011, 31(1): 1-39.
Keywords: Degree of internationalization; Velocity of internationalization; Rhythm of internationalization; Performance
Abstract:
While past studies focusing on the relationship between internationalization and firm performance are abundant, most researchers simply
captured the relationship between the degree of internationalization and firms' performance but neglected such process characteristics as pace
and volatility of international expansion. This study aims to demonstrate an optimal portfolio of internationalization characteristics in terms
of the degree, velocity, and rhythm. Using a sample of 929 Taiwanese listed manufacturing firms, this study traced sample firms' FDI
activities from 2000 to 2004 and examined the relationship between the three characteristics of internationalization and firm performance.
Empirical results show that the relationship between internationalization degree and performance could be graphically depicted as a
three-staged S-shaped curve. MNEs with either deliberate or fast expansion on international markets outperformed those with a moderate pace.
In addition, an unstable rhythm (high volatility) in setting up foreign subsidiaries could do harm to firms' performance. Based on the
findings above, an optimal portfolio of internationalization characteristics suggests that MNEs maintain their internationalization degree on
the second stage, without under-developing or over-expanding their international markets. Meanwhile, on the way to the target degree of
internationalization, we suggest that MNEs expand either slowly with thorough deliberation or quickly in pursuing time economy while
stabilizing their expansion. Managerial implications are provided, and suggestions are made for future studies.