Role of international strategic alliances in internationalization of business group affiliated firms—A system dynamics approach

Abstract

AbstractInterest in business groups (BGs) and international strategic alliances (ISAs) has been of interest in recent times for both academics and practice. However, there are scant studies on the interface of ISAs of BGs and their internationalization performance. This study aims to explore the role of ISAs in the internationalization of BG affiliated firms (BGAFs) by taking a system dynamics approach. The paper explores how different configurations of ISA (motive, scope, structure, orientation and partner) and BG characteristics (diversity, ownership heterogeneity and resource endowment) impact the degree of internationalization (DOI) and financial performance of firms. The model was validated on 17 BGAFs across 8 diverse industrial sectors, subsequent to simulation studies of 60 variables manifesting in 6336 ISAs formed by 405 BGAFs and 440 Non‐BGAFs. Our findings suggest a curvilinear relationship between DOI and financial performance of BGAFs.