Internationalization and Performance of Vietnamese Manufacturing Firms: Does Organizational Slack Matter?

Hien Thi Ngoc Huynh,Khoa T Tran,Phuong V Nguyen

doi:10.3390/admsci8040064

Hien Thi Ngoc Huynh, Khoa T Tran + Show 1 more

Open Access

https://doi.org/10.3390/admsci8040064

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Abstract

This paper aims to investigate the three-stage theory of international expansion in the long run from the perspective of firm behavior. Although this topic has been mostly explored using data from developed countries, this paper aims to fill the research gap in an emerging market by using an extensive unbalanced panel data of 12,704 unlisted Vietnam manufacturing enterprises from the General Statistics Office during 2007 to 2012. The findings illustrated a significant S-shaped relationship between internationalization and performance. Notably, the results depict significantly moderating effects of both high-discretion slacks and low-discretion slacks on the internationalization–performance relationship across three stages of global expansion as an enterprise enhances this relationship in the first and third stage although this worsens it in the middle stage. The empirical results suggest that firms should determine the optimum level of internationalization and slacks in addition to balancing their costs with their real gains.

Highlights

The world has witnessed a spectacular change in which firms from developing countries have played an essential role in the global market (Chittoor 2009)
The differences among the empirical results of studies on the internationalization–performance relationship have been illustrated in several meta-analyses, which have found positive and negative linear relationships as well as combinations of linear relationships, such as U-shaped, inverted U-shaped, and S-shaped (Cardinal et al 2011; Marano et al 2016)
From the perspective of firm behavior, this study aims to explore the global expansion–performance relationship and how the availability of organizational slacks influences this relationship in the context of an emerging economy, such as in Vietnam

Summary

Introduction

The world has witnessed a spectacular change in which firms from developing countries have played an essential role in the global market (Chittoor 2009). In order to obtain access to new markets and maintain long-term profitability, firms have been motivated to implement a global expansion strategy. Local firms are confronted with the costs of the internationalization process, such as barriers to entry, high transaction cost, market volatility, and cultural diversity (Marano et al 2016; Tsai 2014). Small and medium enterprises, in comparison with larger firms, experience several disadvantages in terms of strategic resources and internal capabilities to ensure success in the internationalization process. The findings on whether the increasing internationalization intensity will improve firm performance are very controversial and even raise more questions than answers. The differences among the empirical results of studies on the internationalization–performance relationship have been illustrated in several meta-analyses, which have found positive and negative linear relationships as well as combinations of linear relationships, such as U-shaped, inverted U-shaped, and S-shaped (Cardinal et al 2011; Marano et al 2016)

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