40 years of research on internationalization and firm performance: More questions than answers?

Abstract

Abstract and Key Results * Our introduction to this focused issue of MIR (i) provides an overview of alternative approaches to the modeling of the relationship between internationalization and performance, (ii) suggests answers to the question why previous research on the relationship has yielded contradictory results and (iii) suggests ways how to overcome current problems of research in this important field of international business. * The focused issue reflects the diversity of research on the internationalization-performance relationship: it comprises both conceptual papers and empirical studies, the latter using different methods and data sets. Each of the papers represents a unique answer to the question of how research on the internationalization-performance relationship can be conducted. In total, the papers provide a broad, but also detailed overview of the state-of-the-art in the field. Key Words Internationalization, Performance, Degree of Internationalization Performance as a Basic Research Objective of International Business The question of whether there is a systematic relationship between the internationalization of firms and their performance is central to the field of International Business. Explicitly or implicitly, the question is a major element of all contributions to the theory of foreign direct investment (FDI) and to other theories of foreign market entry. Furthermore, over the years the question has been the subject of a great number of empirical studies, based on various methods. The empirical studies have come to heterogeneous, sometimes contradictory results (Grant 1987, Geringer et al. 1989, Tallman/Li 1996, Gomez-Meija/Palich 1997, Hitt et al. 1997, Gomes/Ramaswamy 1999, Geringer et al. 2000, Denis et al. 2002, Capar/Kotabe 2003, Ruigrok/Wagner 2003, Lu/Beamish 2004, Chiang/Yu 2005). Given the pivotal importance of the topic for the field of International Business, this is highly unsatisfactory. More recently, the debate on the relationship between internationalization and performance has received increased attention. This is mainly due to new empirical studies that make use of new models. While previous empirical research was mostly based on linear (Grant 1987, Daniels/Bracker 1989, Kim et al. 1989) or, in some cases, quadratic models (Gomes/Ramaswamy 1999, Capar/Kotabe 2003), now several authors have postulated a so-called "3-stage theory" based on a sigmoid model (Riahi-Belkaoui 1998, Contractor et al. 2003, Lu/Beamish 2004, Thomas/Eden 2004, Chiang/Yu 2005). This model has quickly established itself in the literature as a "benchmark model". Its proponents claim that the 3-stage theory can be interpreted as a "general theory", i.e., a theory that encompasses other attempts to model the relationship between firm internationalization and performance (for details, see the article by Contractor 2007 in this focused issue). Another contribution that has also helped to rekindle the debate is a paper by Hennart in which he, using arguments from transaction cost theory, very forcefully argues that there is no theoretical basis for expecting a systematic relationship between a firm's internationalization and its performance (Hennart 2007, in this issue). After so many years of research that has been based on the explicit or implicit assumption of a positive relationship of exactly that kind, such a paper is bound to provoke and to irritate. In our opinion, it is helpful to distinguish several levels, or problematic areas, in the discussion on the relationship between internationalization and performance. 1. First of all, there is the fundamental theoretical question of whether one can expect a systematic positive (or negative) relationship between firms' internationalization processes over time, or their degrees of internationalization at any point in time, and their contemporaneous or subsequent performance. …