The relationship between multinationality and performance: Knowledge-intensive vs. capital-intensive service micro-multinational enterprises. Issue 5 (October 2017)

• Record Type: Journal Article
• Authors: Shin, Joonho; Mendoza, Xavier; Hawkins, Matthew A.; Choi, Changbum
• Is Part Of: International business review. Volume 26:Issue 5(2017:Oct.)
• Page Start: 867
• Page End: 880
• Publication Date: 2017-10
• Subjects: Micro-multinational enterprises -- Service industry -- Multinationality and performance relationship -- SME internationalization -- Spain; International business enterprises -- Periodicals; 338.8805
• DOI: 10.1016/j.ibusrev.2017.02.005
• Languages: English
• ISSNs: 0969-5931

Abstract

Highlights: In mMNEs, industry characteristic and contextual factors impact the M-P Relationship. Knowledge-intensive mMNEs performance improves when they first expand but declines at low levels of multinationality. The scale-sensitive nature of capital-intensive mMNEs leads them to concentrate expansion to a few foreign markets. Abstract: This research explores the relationship between multinationality and firm performance (M-P) in the context of micro-multinational enterprises (mMNEs) within the service sector. We examine the moderating effects of industry characteristics using a data set of 1082 Spanish service mMNEs over an eight-year period. The empirical results provide statistical evidence that knowledge-intensive service mMNEs exhibit an inverted U-shaped M-P relationship, while capital-intensive service mMNEs present a U-shaped relationship. Our findings demonstrate that knowledge-intensive service mMNEs increase their performance in the initial stage of multinationality, encounter a threshold of internationalization at relatively low levels of multinationality and have a propensity to over-internationalize. By comparison, capital-intensive service mMNEs experience negative performance effects at low levels of multinationality and positive ones as they further internationalize. Given that their operations are scale-sensitive, they tend to expand internationally by concentrating their operations in few foreign markets as a means to overcome the liabilities of internationalization and smallness. We contribute to the literatures on multinationality research in the service sector and on SME internationalization by showing that the effects of multinationality on the performance of mMNEs depend on industry characteristics and that such contextual factors provide a better understanding of the M-P relationship.