Double-edged Sword of Global Demand Heterogeneity on the Performance of Service Multinationals

Abstract

Drawing upon knowledge-based view and transaction-costs perspective, the study identifies customer relationship orientation and structural flexibility as the two key mechanisms that service multinationals can use to capture the benefits and mitigate the costs of global demand heterogeneity. Using a sample of Chinese service multinational firms, we show that one the one hand, customer relationship orientation amplifies the benefits of customer knowledge in the interaction between customer relationship orientation and global demand heterogeneity, resulting in a positive impact on internationalization performance. On the other hand, structural flexibility mitigates the costs of knowledge processing and routine adaptation in the interaction between structural flexibility and global demand heterogeneity, also contributing to the improved internationalization performance. Besides, production and consumption simultaneity strengthens the positive moderating effect of customer relationship orientation in the global demand heterogeneity–internationalization performance relationship. This study contributes theoretically and practically to our knowledge of how demand-side factors can shape firms’ internationalization performance.