Rapid internationalization and innovation performance

Abstract

Although internationalization is an inherently dynamic process, the time dimension of international expansion has rarely been a major focus of international business research. Using an organizational learning perspective, we attempt to explain how time-based international expansion patterns influence parent companies’ innovation performance in emerging markets. We consider that the internationalization process could generate potential benefits attributable to knowledge transfer while being influenced by time compression diseconomies. Based on these two mechanisms, we test four hypotheses regarding parent companies’ innovation performance: 1) internationalization speed (main effect); 2) internationalization rhythm (two-way interaction); 3) organizational slack; and 4) competitive intensity (three-way interaction). Using unbalanced panel data of Chinese multinational enterprises between 2008 and 2014, we find a negative relationship between parent companies’ internationalization speed and innovation performance, and this relationship is stronger if the internationalization rhythm is irregular. The negative moderating effect of an irregular rhythm weakens with an increase in internal organizational slack and strengthens with an increase in external competitive intensity. These results suggest that firms should assess their internal capabilities and external competitive environment to judge whether a certain international pattern is feasible or necessary.