How firm performance affects internationalization

Jae C. Jung, Pratima Bansal

Research output: Contribution to journalArticleResearchpeer-review

25 Citations (Scopus)

Abstract

Only a few studies have investigated whether a firm's performance has an effect on its internationalization. These studies, focusing on actual firm performance, have suggested a resource-based argument and generally found non-significant results. In this paper, we argue that relative firm performance is critical in determining a firm's internationalization because it influences a firm's attitude toward risk-taking. We apply prospect theory to predict this relationship. Using time-series, cross-sectional analysis of 701 Japanese firms from 1993 to 1998, we uncovered an inverted-U shaped relationship between a firm's relative performance and its degree of internationalization using its historical performance target. As compared to the industry target, relative performance showed a positive impact on a firm's internationalization.

Original languageEnglish
Pages (from-to)709-732
Number of pages24
JournalManagement International Review
Volume49
Issue number6
DOIs
Publication statusPublished - Dec 2009
Externally publishedYes

Keywords

  • Behavioral perspectives
  • FDI
  • Internationalization
  • Multinational enterprise
  • Prospect theory
  • Relative performance
  • Risk-taking

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