Internationalization and performance in agri-food firms

Abstract

This paper studies the relationship between internationalization and performance in agri-food firms. In line with the recent literature, it analyses the effects of the degree of internationalization using a uniform sample, a long-term focus and a measure that combines export intensity and regional diversification. The study empirically confirms the hypothesis of a horizontal S-curve relationship between geographical diversification and performance and identifies three phases. Export firms are found in the first phase; their profits are low due the initial costs incurred in exporting. Companies with a more advanced internationalization process are in the second phase; they benefit from the positive outcomes of operating on a larger scale. Lastly, the third phase contains highly international, geographically diversified companies; their performance decreases as a result of the costs of entering extra-regional markets, which are especially steep in this sector; they also face higher transition costs and organisational complexity. The results presented could be interesting for policymakers designing and implementing export programmes for agri-food firms. Policies should include assistance at the start of the internationalization process and an attempt to prolong the strategy until the volume of business is sufficient to start showing an increase in performance. The policies could possibly promote networking between Spanish and foreign companies to reduce the costs of more global internationalization strategies.