THE INTERPLAY BETWEEN FIRM�S INTANGIBLE ASSETS, CORPORATE MULTINATIONALITY AND PERFORMANCE

Abstract

ABSTRACT In this paper we analyze the predictions of classical internalization thinking that higher level of firm’s intangible assets leads to greater corporate multinationality. Using a sample of four European countries in the time from 1998 to 2003 we support the predictions of internalization theory showing that R&D and advertising intensity are valid and significant predictors of the firm’s degree of multinationality. Hence, the empirical findings show that the greater the possession of intangible assets, the higher the level of corporate multinationality. Furthermore, based on the concept of transfer costs we show that corporate multinationality can be considered as a moderating variable in the relationship between firms’ intangible assets and their performance. Using the same sample for four European countries we demonstrate that high levels of corporate multinationality are required to successfully exploit firm-specific intangible assets abroad. In addition, high multinationality degrees compensate for transferring intangible assets abroad making them even more valuable/profitable. On the contrary we find that low multinationality degree do not guarantee superior performance. Additionally, the costs associated with the transfer of such intangibles and thus, corporate performance strongly depend on the firm’s level of international operations. Consequently, successful transfer and exploration of firm’s specific intangible assets requires higher degrees of corporate multinationality. Keywords Multinationality; Performance; Intangible Assets; Internalization Theory; Transfer Costs; European Firms