Degree Of International Diversification Research Articles

La influencia de la identificación de los miembros de la familia con la empresa en la diversificación internacional de las PYMES familiares: el papel moderador de la exploración y la explotación

This research investigates the effect of the key socio-emotional goal of family members’ identification with the firm on international diversification. Furthermore, it examines the moderating effect of a family firm’s learning orientation – expressed in terms of a firm’s exploratory and reproductive orientations – on the relationship between this goal and a firm’s degree of international diversification. Our findings do not validate the thesis according to which a reproductive orientation would reinforce the negative relationship between family members’ identification and international diversification. However, it shows that exploratory orientation negatively moderates the relationship between family members’ identification with the firm and international diversification.

Intra- and inter-regional diversification, subsidiary value chain activities and expatriate utilization

Abstract Although it is well established in the current staffing literature that why and how multinational enterprises (MNEs) allocate more or fewer expatriates in some subsidiaries than others, little is known about why and how some MNEs utilize more or fewer expatriates than other MNEs. This paper builds on regionalization theory to argue that intra- and inter-regional diversification has to do with the overall use of expatriates in MNEs. An empirical investigation of Korean MNEs demonstrates that the degree of intra- and inter-regional diversification has significant impacts on the level of expatriate utilization by MNEs. The results also reveal an interesting moderating influence of subsidiary value chain activities. MNEs tend to vigorously adjust their use of expatriates in downstream subsidiaries depending on the degree of intra- and inter-regional diversification. However, they do not adjust their use of expatriates in manufacturing subsidiaries upon the degree of international diversification. Overall, this study extends our understanding of how MNEs manage a geographically dispersed organization in a semi-globalized world.

Exploring structural and strategic correlates of difficulties in the internationalisation process of Italian wine SMEs

Internationalisation has been a key strategy for businesses around the world over the last decades. Nowadays, the European wine sector finds itself in an increasingly competitive international environment, which is characterised by mature and declining per capita wine consumption in traditional markets and increasing competition form new emerging wine producing countries. Structurally, this sector is characterised by a vast majority of family businesses and faces several particularities. This research investigates the perception of difficulties in the internationalisation process of small and medium wineries in two emerging Italian wine exporting regions. It is found that the difficulties perceived in the internationalisation process depend on strategic and structural factors. The strategic factors highlighted in this paper are the degree of international diversification and the geographic scope of a firm's export activities. The structural factors relate to the characteristics of the exported goods, the management and the size of a firm. The findings are discussed in the light of recent developments of Italian wine exports and their implications for the Italian wine sector are derived.

How may the nature of family firms explain the decisions concerning international diversification?

This study explores how the ownership structure of family firms gives these organizations a distinctive nature in terms of international diversification. We argue that the heterogeneity of family firms may cause variations in the degree of international diversification among these types of businesses. We have studied three factors related to ownership structure: the degree of family ownership and the type and degree of ownership of the second largest shareholder (another family or a financial company). The empirical evidence is provided by a sample of European and Asian family firms (2004–2008). Our results show that the degree of family ownership has a negative impact on the degree of international diversification. However, the presence and ownership share of a financial company as the second largest shareholder in a family firm favor this diversification. This study also reveals the importance of the financial company as a second owner in the preference family firms show for growth in international markets.

Time, space, and international diversification of service firms: assessing the abnormal growth of container port MNs

Firms’ internationalization paths and their antecedents has become a major topic of recent international business (IB) literature. Indeed, a lively debate about the adequate degree of international diversification has recently emerged. To challenge the traditional temporal and spatial constructs proposed by the international theories, the profound restructuring of the container port sector - driven by the international opening of local markets, the evolution of competitive paradigms, and the overseas expansion of private stevedores - makes it an ideal setting. Using the strategic management and IB literature, the paper aims to demonstrate and measure the abnormal patterns of international diversification embarked on by container port multinational enterprises (MNEs). The analytical lens adopted examines two specific dimensions of internationalization: (i) time, i.e., the pace and rhythm of international diversification, and (ii) space, i.e., the geographic scope of a firm, modeled as inter- and intra-regional diversification. The findings suggest that some container port MNEs leapfrog some of the logical sequential internationalization phases. Moreover, even when latecomers pursue fast and irregular expansion patterns to catch up with the leaders, their geographic scope remains lower than that of the pioneering MNEs.

Board Influence on a Firm's Internationalization

Manuscript Type: Empirical Research Question/Issues: The resource-based view of the firm may provide the theoretical explanation as to how boards can be a source of firm competitive advantage. Directors' experience, knowledge, expertise are valuable, rare, inimitable and non-substitutable resources that making up the potential. These resources must be integrated with others firm resources in strategic processes through dynamics of relations. Research Findings/Insights: Given the preliminary nature of this work, the empirical section is an exclusive analysis of the board's potential. Our specific aim is to establish whether resources that directors bring to are sources of competence and ability with consequences for international strategic decisions. To do this, we use a sample of 562 members of 45 listed Spanish companies. Our results show that the average tenure is negatively related to the firm's degree of international diversification. Directors with long tenures may operate from the basis of routines that are built up over time and their knowledge of the firm could eventually become a less valuable resource. The empirical findings also indicate that the directors' managerial experience within the specific industry to which the firm belongs and a high level of academic achievement, affects the firm's degree of international diversification. Theoretical/Academic Implications: The contribution of this article is three-fold; it emphasizes the role of directors in the effectiveness, investigating why and how relevant elements of directors' human capital can enhance ability to perform their roles making up the potential. Secondly, it refines and extends the concept of board capability as an adequate configuration of potential and relationship dynamics that allow to undertake their task competently over the time. Third, this article stresses the active participation of in firm internationalization. Practitioner/Policy Implications: One of the important practical implications of these results refers to the selection of members. In order to increase effectiveness, in the context of firm internationalization, the selection process must be guided by the search of intangibles, inimitable and unique resources, which the can capitalize on in order to differentiate its potential over competitors. Keywords: Corporate Governance, Directors' Resources, Board Capability, Board Potential, Internationalization.

Why do firms employ foreigners on their top management team? An exploration of strategic fit, human capital and attraction-selection-attrition perspectives

The number of foreigners appointed to top management teams has increased significantly over the past decade. However, the question of why some firms elect to employ foreign nationals in top executive positions remains unclear. This study tests competing explanations based on strategic fit, human capital and attraction—selection—attrition perspectives. Results from empirical tests utilizing a multi-level methodology on a sample of Swiss publicly listed companies suggest that degree of international diversification is positively associated with the likelihood of having a foreign executive, whereas human capital characteristics do not explain the propensity to employ a foreigner on the top management team. In addition, nationality diversity at the board level, as well as the international experience of the top management team, predict the probability of having a foreign top executive.

International Diversification and Management Earnings Guidance: The Effects of Reg FD

ABSTRACT: We examine the relation between the degree of international diversification and management earnings guidance. While more internationally diversified firms create a more complex information environment, providing an incentive to increase public disclosure, they also have higher costs of disclosure, resulting in disincentives to increase public disclosure. Management earnings guidance is measured in multiple ways, including likelihood, frequency, quality (i.e., point versus range versus open-ended versus qualitative forecasts), forecast error, and bias. We find that more internationally diversified firms issued more guidance prior to Reg FD, but they issue less earnings guidance and lower quality guidance post-Reg FD, when managers are required to make voluntary disclosure of information public. Regarding management forecast error, we document that management earnings forecasts of more internationally diversified firms became less accurate and more biased following the implementation of Reg FD. In summary, we provide evidence of a deterioration in management guidance for internationally diversified firms following Reg FD from the perspectives of likelihood, frequency, quality, accuracy, and bias.

Compliance with International Financial Reporting Standards and auditor choice: New evidence on the importance of the statutory audit

We examine the impact of auditor choice on IFRS compliance under the assumption of strict exogeneity of auditor choice. Our results reveal that compliance is positively related to auditor choice after controlling for firm size, profitability, leverage, degree of international diversification, and whether a firm has a U.S. listing or was audited according to International Standards of Auditing. We also find that auditor choice is positively related to firm compliance when controlling for unmeasured, firm-specific effects. The results of our study reinforce the importance of developing institutional mechanisms (e.g., enforcement, auditing, or corporate governance structures) to encourage compliance with IFRS.

International Diversification and Management Earnings Guidance

The objective of this paper is to examine the relation between the degree of international diversification and management earnings guidance. Using 30,941 firm-year observations, we find that more internationally diversified firms are less likely to issue earnings guidance and their disclosure quality (measured using the Francis et al. [2008] voluntary disclosure index) tends to be lower. This pattern is especially pronounced in the post-Reg FD period, when managers are required to make voluntary disclosure of information public. Second, the evidence shows that management earnings forecasts of more internationally diversified firms were more accurate prior to Reg FD, suggesting that capital market incentives (i.e., cost of capital reduction) induced more diversified firms to issue higher quality guidance. However, post-Reg FD, more internationally diversified firms issued less accurate forecasts, consistent with the notion that agency and proprietary cost concerns from making all disclosures public led these firms to reduce disclosure quality. Both of these results are largely consistent with the chilling effect of Reg FD on information flow (e.g., Opdyke 2000; Wang 2007).

Market Size, Legal Institutions, and International Diversification Strategies: Implications for the Performance of Multinational Firms

Recognizing that country-specific resources are generally difficult to imitate or diffuse across national boundaries, we propose that home country conditions are key determinants of firms’ strategic choices. By embracing insights from both institutional economics and resource-based view, we identify two country-level environmental constituents – domestic market size and legal institutions – to examine how these resources influence multinational firms’ international diversification strategies. We further propose that home country legal institutions moderate the link between geographic diversification and firm performance. These hypotheses are tested with historical data on 435 multinational firms based in 13 developed economies. Results suggest that a multinational firm’s degree of international diversification has a U-shaped relationship with the size of the firm’s domestic market; firms from civil law countries are more likely to pursue international diversification than their counterparts from common law countries; and the effect of international diversification on firm performance was more pronounced among MNCs from civil law countries.

Why Do Firms Employ Foreigners on Their Top Management Teams? A Multilevel Exploration of Individual and Firm Level Antecedents

In Europe, in particular, the number of foreigners appointed to top management teams has increased significantly over the past decade. However, the question of why some firms elect to employ foreign nationals on their top management teams remains unclear. This study utilizes a multi-level methodology to test the degree to which employment of a foreigner on the top management team is driven by individual level human capital characteristics versus firm level strategic considerations. Results from empirical tests on a sample of Swiss publicly listed companies suggest that degree of international diversification is positively associated with the likelihood of having a foreign executive, whereas human capital characteristics do not explain the propensity to employ a foreigner on the top management team. Further analyses indicate that nationality diversity at the board level, as well as the international experience of the top management team, are possible predictors of the probability of having a foreigner on the top management team.

Competitive Performance and International Capital Mobility: Hypothesis of Potential Endogenous and Exogenous Competitive Advantages of Firms

The endogenous and exogenous competitive advantages of firms across different phases of foreign direct investment depend on the resources used by industries for their financial development and growth. These advantages, as well as the influence of internal owners, facilitate the access of firms to foreign financial markets. This study attempts to clarify the relationship between those financial goals and firm's advantages, as well as to analyze the relationship between the degree of international diversification (hereinafter DOI) and firm value in Germany, France, the U.K., Spain or Denmark. Our results support a curvilinear relationship between DOI and firm performance that is articulated in three stages in the presence of industry reputation, technological, distribution and financial systems barriers and also showing high transaction cost economics. These findings point to a cyclic process in the firm's international financial and geographical expansion, where overcoming such barriers and developing governance and coordination mechanisms to minimize transaction cost economics becomes the main challenge of the firm in order to compete with a dynamic capital mobility at the worldwide level.

Corporate diversification and performance: evidence on production efficiency

This study utilizes the COMPUSTAT database to extract 31,002 firm-year observations for the firms publicly traded on US exchanges during the 1995–2001 period, and examines the relationship between corporate international diversification and technical productive efficiency. The parameters of a stochastic frontier function are estimated simultaneously with the firm-specific production inefficiency effects in a panel framework. After controlling for product diversification, industry and firm size, the author finds the degree of international diversification is positively related to production efficiency. The results are robust to the choice of multinationality variables including number of geographic segments, foreign income ratio and foreign tax ratio. In all, the results suggest that multinational corporations are utilizing their operating flexibility.

Human Capital and International Diversification

International portfolio diversification is looked at from an unusual perspective: the interaction between human capital and international diversification. The author notes that, despite well-grounded arguments in favor of international diversification, Americans hold an almost insignificant proportion of foreign stocks in their portfolios. The author examines the effects of human capital to see whether adding that dimension helps explain that apparent puzzle. He shows that extremely risk-averse investors may choose to own domestic equity only when human capital is considered, although extremely risk-averse investors may not choose to diversify internationally, even if human capital is ignored. Furthermore, the data support the contention that more representative investors should diversify internationally, but that this result does not seem to depend much on human capital. The author argues that the experiment reconciles several different previous findings, but concludes that, in general, his results seem to indicate that the degree of international diversification in an individual9s portfolio depends largely on the investor9s attitude toward risk.

International Diversification: A Review and Analysis of the Evidence

The purpose of this paper was to explore the motivation and rationale behind international investment to better explain the conflicting results reported in previous research and to provide some answers to the current debate on international diversification. Monthly return data and annual financial data of 424 NYSE‐listed companies over four 5‐year periods was examined, dividing the sample companies into three groups according to their degree of international diversification. Averages for monthly returns, market‐adjusted returns, total risk, and systematic risk were analyzed. An ongoing debate among students of multinational corporations (MNCs) focuses on whether the intent of corporate international diversification has been to increase stockholders' return or to reduce risk (Siegel et al. 1992; Shalchi and Hosseini 1990; Ndubiuzu 1990; and Theerathom et al. 1992). Based upon the observation of the pattern of holdings, Buckley (1988) argues that firms do not become MNCs to reduce risk. Risk reduction behavior would lead to a strategy of seeking investments in countries with uncorrected return patterns, as with some of the underdeveloped countries. Instead there has been a concentration of foreign direct investments in advanced market economies with high return correlations among each other. Buckley (1988) concludes, therefore, that MNCs are imperfect vehicles for risk diversification. Fatemi (1984) suggests that much of the international diversification made by corporations may have a defensive purpose. Their goal may be, for example, to maintain participation in some export markets or to match the previous move of a competitor, and not necessarily to increase the firm's revenue. The motivation for foreign corporate investments has been attributed to many specific factors, related both to the firm and the country. Included among these factors are: (a) economies of scale associated with large size and the ability to produce in several countries, (b) intangible assets, such as technological expertise or entrepreneurial skills, (c) market power due to the size of markets and previous experience with the domestic market, (d) industry grouping, (e) the availability of additional natural resources, as well as less costly labor and/or capital, (e) advantageous regulatory framework for the firm offered by the host country, and (f) the economic influence of the particular time period involved on firms and countries. The purpose of this paper is to provide additional evidence on whether international diversification has either increased stockholder's return or reduced their risk and to consider the possible influence of several factors. A sample of 424 companies was drawn from the New York Stock Exchange (NYSE), and was divided into three categories, i.e., domestic, intermediate, and multinational. Two return and two risk measures were then calculated for four periods of time (1968–1972, 1973–1977, 1978–1982, and 1983–1987) to examine the relationships between the degrees of international diversification and the measures of risk and return. One of our concerns was to try to address some of the discrepancies among prior research findings.