Abstract
Authors: Dmitry Y. Shcherbakov
 Corporate international diversification has become a widely used growth strategy. However, the majority of scientific researches insist on its value-destroying pattern. As most of these researches are focused on companies from the developed countries the experience of companies from developing countries remains fairly unexplored.The current paper proposes an estimation of internalization-performance relationship from operational efficiency prospect. The proposed model has been empirically tested on a sample of large Russian companies. The results identify a non-linear U-shape relationship between a degree of internationalization and companies’ return on capital employed. Overall for the majority of companies international diversification refers to diminish in operational efficiency.
Highlights
During the last two decades the level of corporate international diversification (CID) has been significantly growing both in developed and developing countries
This paper contributes to the existing literature by proposing a model for estimation of internationalization - operational performance relationship which is applied for a sample of large
This paper contributes to the internationalization-performance literature by analyzing an effect of internationalization on current operational efficiency of large Russian companies measured by return on capital employed
Summary
During the last two decades the level of corporate international diversification (CID) has been significantly growing both in developed and developing countries. According to the majority of researches on performance of cross-border diversification the companies get into the internationalization paradox - the scholars demonstrate that the internationalization activities are mainly value-destroying. Hypothesis 1.2: The level of product diversification has a positive impact on operational efficiency of Russian companies related to internationalization. Lu and Beamish (2004) have identified a positive impact of investments in intangible assets (may be proxied by R&D and advertising intensity) over internationalization performance The authors explain this finding by the following reasons: 1) once being acquired intangible assets do not depreciate more intensively when they are applied in different markets in comparison to domestic market only, allowing an internationalized firm to generate higher returns on Выпуск #4(24), 2012.
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Schedule a callMore From: Journal of Corporate Finance Research / Корпоративные Финансы | ISSN: 2073-0438
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