Internationalization motives, location advantages and performance: the case of Indian firms from knowledge-intensive industries

Abstract

PurposeRecent empirical findings on the relationship between internationalization and firm performance (I–P) suggest a significant role of firm's context. Extending this line of argument, the authors study the effect of internationalization on firm's performance for emerging market firms from knowledge-intensive industries, taking into account the firm's motive of internationalization and host country’s location-based advantages.Design/methodology/approachThe authors link host country-specific advantages (CSAs) with firm-specific advantages (FSAs) to identify three distinct settings of internationalization for emerging economy firms – (1) asset-exploitative internationalization in developing or least developed countries, (2) asset-exploitative internationalization in developed countries and (3) strategic asset-seeking internationalization. The authors test this study’s hypotheses on a sample of 415 Indian firms from knowledge-intensive industries.FindingsThe authors find that firm's performance upon internationalization is non-linear in each of the three different settings. The nature of the non-linear relationship depends upon location-based advantages of the host country and the motive of internationalization.Originality/valueThe motive of internationalization and the location-based advantages sought during internationalization are unique for emerging economy firms. Hence, the study extends understanding of the I–P linkage in an emerging economy context.