تاثیر تنوع فرهنگی MNE fبر عملکرد رابطه بین المللی : نظریه و شواهد از شرکت های چند ملیتی اروپایی
|کد مقاله||سال انتشار||مقاله انگلیسی||ترجمه فارسی||تعداد کلمات|
|11337||2014||14 صفحه PDF||سفارش دهید||محاسبه نشده|
Publisher : Elsevier - Science Direct (الزویر - ساینس دایرکت)
Journal : International Business Review, Volume 23, Issue 1, February 2014, Pages 313–326
Prior work has established the importance of degree of internationalization for understanding the performance of multinational enterprises. Despite all efforts, however, the relationship between degree of internationalization and firm performance (I-P) is still the subject of ongoing debate following inconclusive findings. We suggest that the international business literature has largely overlooked MNE cultural diversity as an essential determinant of the I-P relationship. We argue that the impact of the degree of internationalization on MNE performance is contingent on MNE cultural diversity. The impact of the degree of internationalization on performance is positive for MNEs that operate in culturally similar countries and negative for MNEs that operate in culturally diverse countries. Our study is among the first to examine the impact of MNE cultural diversity on the I-P relationship with a unique panel dataset from European multinationals. The results provide convincing support for our approach to the study of the degree of internationalization and MNE performance.
ver since firms first started foreign operations, the question of whether and how the degree of internationalization fosters company performance has been one of the most important in international business (IB) research (Banalieva and Sarathy, 2011, Banalieva and Robertson, 2010, Buckley and Casson, 1976, Dunning, 1981, Hymer, 1976, Johanson and Vahlne, 1977, Johanson and Vahlne, 2009, Ruigrok and Wagner, 2003 and Stinchcombe, 1965). Despite all efforts, however, the internationalization–performance (I-P) relationship is still the subject of ongoing debate following mixed empirical findings (Hennart, 2007 and Hennart, 2011). In this study we delve deeper into these empirically inconsistent results. We argue that a contingency perspective on the I-P relationship for multinational enterprises (MNEs) is useful to address the prior mixed results. We add to existing research by demonstrating that MNE cultural diversity determines the relationship between the degree of internationalization and firm performance. Degree of internationalization is the same as the degree of geographic diversity or country diversity, that is, how many countries or how widely spread the MNE is. MNE cultural diversity is an assessment of how similar the different countries are. Assessing the situation, Hennart (2011) and Wiersema and Bowen (2011) conclude that while the volume of the I-P research stream is substantial and theories on internationalization are abundant, the inadequacy of our current conceptualizations and measures of internationalization persist. Hence, the I-P research domain is broad, but it has not yet reached maturity and there is a need to re-examine conventional wisdom about internationalization and performance. We propose that MNE cultural diversity is underexplored in I-P research. One of the most important dimensions of foreign business contexts which can impact on the effect of internationalization on performance is the national culture of host countries vis-à-vis the home country. We add depth to the understanding of the relationship between internationalization and performance and explain one of the complicating factors–MNE cultural diversity. We explain that as a firm's corporate strategy invites greater internal cultural diversity through international expansion, there are higher costs to the firm that sometimes outweigh the benefits of internationalization. We analyze interaction effects by using product-term regression techniques to support our main conjecture empirically (Baron and Kenny, 1986 and Jaccard and Turrisi, 2003). We test our hypothesis concerning the effect of MNE cultural diversity on the I-P relationship on a panel dataset for 2003–2007 that combines headquarters information from the largest European MNEs. Our window of observation and research settings are relevant to this study because in this period many European MNEs expanded their international activities drastically (Buckley and Casson, 2009 and Rugman and Oh, 2009). Our empirical research enables the study of whether the particular trends of internationalization by European MNEs improve their performance. The outline of the paper is as follows. We begin by reviewing research in two areas that serve as the foundation for our contingency framework of MNE internationalization: the literature on the I-P relationship and the literature on how cultural diversity determines MNE performance. Next, building on this theoretical background, we formulate our hypothesis about the effect of MNE cultural diversity on the I-P relationship. Then, we introduce this paper's research methodology, addressing issues related to our measures of the variables and estimation methods. Following that, we present our empirical evidence. Finally, we conclude with an appraisal, discussing limitations and offering a reflection on opportunities for future research.
نتیجه گیری انگلیسی
Firm performance studies report ambiguous, inconclusive and sometimes contradictory findings on internationalization (Hitt et al., 1997; Lin, Lui, & Cheng, 2011; Tihanyi et al., 2005). Additionally, prior work on internationalization and firm performance did not include cultural diversity. Our study is among the first to investigate the relationships between MNE cultural diversity, the degree of internationalization and firm performance. We offer a unique perspective that solves an important part of the ongoing debate concerning the trade-off between the benefits and costs of internationalization to MNEs (Bobillo et al., 2010 and Ruigrok et al., 2007). We argue that the effect of the degree of internationalization on MNE performance is conditional on the level of cultural diversity that accompanies internationalization. We empirically show that the impact of the degree of internationalization on performance is indeed not the same for all MNEs: it is positive for MNEs that operate in culturally similar countries and negative for MNEs that operate in culturally diverse countries. International business research is dominated by the question concerning the precise relationship between the degree of internationalization and firm performance. We move beyond this I-P relationship debate by integrating MNE cultural diversity in firm performance research from a contingency perspective. Some of the international business studies highlight the benefits of internationalization on MNE performance (Click and Harrison, 2000, Denis et al., 2002, Dunning, 1981 and Goerzen and Beamish, 2003). MNEs that expand their activities abroad are expected to reap a variety of economic benefits – such as economies of scale and scope – beyond that which can be achieved by operating only domestically (Keller and Yeaple, 2009, McGahan and Victer, 2010 and Wan, 2005). Further, it is well known that there are differences in market conditions across geographic areas which enable firms to capitalize on market imperfections and to obtain sustainable returns on their invested resources (Verbeke, 2010 and Xu and Shenkar, 2010). In turn, these economic benefits are expected to improve the financial performance of a company. Although this suggests a positive relationship between the degree of internationalization and performance, we question to what extent such a positive relationship exists ad infinitum. For example, internationalization could crowd out alternative investments and erode incentives for other activities that foster MNE performance. As internationalization increases, the positive effect of the increased access to markets or capabilities could be offset by the inefficient allocation of resources and thus result in lower performance. This implies that internationalization could offer a diminishing return for MNE performance (Qian et al., 2008 and Wang et al., 2011). Research into cultural diversity and firm performance largely mirrors this line of argument (Palich et al., 2000 and Palich and Gomez-Mejia, 1999). Gomez-Mejia and Palich (1997) is a landmark study offering convincing theoretical arguments that cultural diversity should hamper MNE performance. Using a sample of 442 large US firms and introducing a wide range of different CD measures, they nonetheless were unable to find significant support for the hypothesized CD-P relationship for three discrete time periods (i.e. 1985–1989, 1990–1994 and 1985–1994). We continue to work in line with the main explanations that Gomez-Mejia and Palich offer for the non-significant findings, including first and foremost our contingency perspective along with the non-monotonic relationships between the variables of interest, a refined measure of MNE cultural diversity, and a more recent panel dataset for European MNEs. Our empirical findings generally support our contingency hypothesis. Based on a unique panel dataset of 568 European multinationals, we introduce a new measure for MNE cultural diversity, which is a refinement of the original Kogut and Singh (1988) index. Our measure not only accounts for asymmetry in cultural distance between countries, but also for the level of international experience of the multinational enterprise. In so doing, we anticipate a criticism enunciated by Shenkar (2001), who suggests that the effects of cultural distance are by no means homogeneous for all firms. We argue that the number of subsidiaries per country differs per MNE and needs to be accounted for in studies that aim to analyze the effects of the degree of internationalization on firm performance. Our study finds significant support for the interaction between MNE cultural diversity and the degree of internationalization that conditions the non-monotonic inverted U-shaped relationships between the degree of internationalization and firm performance, and between MNE cultural diversity and firm performance. The aforementioned peculiarities of our study help reassess the overwhelming non-significant findings reported by Gomez-Mejia and Palich (1997) and suggest that careful consideration of model specifications, samples, observation periods, measures and methods is required to understand the relationship between internationalization and firm performance. Our study also offers an explanation for the recent suggestions that many firms do operate internationally but still remain relatively local rather than being truly global (Mayer and Ottaviano, 2008 and Tung and Verbeke, 2010). Rugman and Verbeke, 2004 and Rugman and Verbeke, 2005, for example, found that most Fortune Global 500 firms are home-region-oriented, suggesting that the internationalization of MNE activities is not unlimited and comes at a cost (Collinson and Rugman, 2008 and Osegowitsch and Sammartino, 2008). We offer a new contingency perspective for this observation: MNEs can realize higher performance levels from diversified access to country-specific assets that match and complement existing activities. Our findings have two important implications for managers who want to determine whether internationalization will be a successful strategy and which factors facilitate or hamper the envisioned performance-enhancing internationalization efforts. First, the results indicate that not all firms derive the same benefits from their internationalization efforts. In such efforts, managers need to carefully decide which country to enter and do business in, bearing in mind their company's existing cultural diversification level. MNEs face costs due to liabilities of foreignness (Mezias, 2002 and Zaheer, 1995), and these costs are likely to be amplified when MNEs do business in host countries with very different cultural contexts. Our results reaffirm the importance of intercultural management, because we show that the costs of internationalization exceed the benefits as cultural diversity increases. Given that national cultures are relatively stable (Hofstede, 2001, Kirkman et al., 2006 and Tihanyi et al., 2005), investments in learning foreign cultures – for example by means of cross-cultural training – will result in firm-specific knowledge that helps entry decisions or postpones the internationalization threshold (Ruigrok et al., 2007). Second, managers should be patient when exploring international markets, controlling costs at moderate levels of internationalization and avoiding high levels of internationalization. An increasing number of firms are limited in their expansion ambitions by the size of their home markets, as is often the case in European countries. Internationalization can open up new avenues for successful performance, such as scale and scope economies, and learning and taking advantage of differences in factor markets. Although our results show that internationalization is largely beneficial to MNE performance, there is a threshold beyond which internationalization no longer benefits but actually hampers firm financial achievements. Accordingly, the performance of firms is less optimal if they focus too little or too much on internationalization. Managers therefore need to assess the benefits and costs of internationalization at the margins, because we have demonstrated that a monotonous I-P relationship is absent. We would like to mention a number of limitations that offer opportunities for future research. First, our empirical study shows the relevance of using fine-grained measures for cultural diversity anticipation, including asymmetry in home-host country differences. This is important for I-P and CD-P relationships and the interrelatedness between the degree of internationalization and cultural diversity, as presented here. Our cultural diversity measure is a first step towards a new line of measures and can be complemented with subsidiary characteristics or internationalization motives other than the ones studied here. For instance, the type of activity performed by a subsidiary – for example design, marketing, sales, purchasing or production – could also be affected, as some are more reliant on tacit knowledge and information (Gereffi, Humphrey, & Sturgeon, 2005) and are therefore more subject to the impediments or enrichments that cultural diversity can offer. MNEs can locate their subsidiaries or even their headquarters in countries that offer preferential tax treatment or other government policies beneficial to the firm. Further, the size of subsidiaries per MNE per country could vary, creating different management relationships between headquarters and subsidiaries. MNEs could also differ in the exact timing of their international expansion, depending on, for instance, the level of economic growth in the host countries under consideration. It is an acknowledged limitation that due to data availability, our measure of cultural diversity is not yet able to account for the aforementioned features. A new country where the investing firm establishes a single person representation unit receives as much weight as a manufacturing unit with a substantial number of employees. Future research could collect more detailed information for each of the aforementioned subsidiary characteristics and MNE internationalization motives and, as such, analyze whether they also determine the relationship between the degree of internationalization and firm performance. Second, we tested our model for European firms. Europe offers an appropriate research context because of the cultural differences between European countries. A next logical step would be to test our model for firms headquartered in other regions and, in so doing, determine whether the role of MNE cultural diversity for I-P relationships is similar. Selecting MNEs from the United States or Japan would enable cross-validation of our study with other insightful studies that have analyzed the I-P relationship of firms from these Triad countries (e.g. Lu and Beamish, 2001 and Qian et al., 2008). Additionally, our research is particularly relevant in the context of Central and Eastern European (CEE) countries. CEE countries have experienced a strong inflow of foreign direct investment, due to the liberalization of trade policies and the mass privatization of state-owned companies (Meyer & Peng, 2005). The majority of CEE countries privatized through divestment of state assets to strategic investors, with an important role for MNEs. MNEs from all over the world enter CEE markets using different entry modes and applying diverse patterns of ownership and control, which raises the question of whether MNE cultural diversity also determines the I-P relationship in this region. New data collection would also allow confirmation of the validity of our results by utilizing diversity dimensions other than cultural diversity, such as language, religious, economic and regulatory diversity (Brouthers and Brouthers, 2001 and Shenkar, 2001). The latter is a special case, given that regulatory dimensions are unique to a country's institutional context and an important feature that, alongside and on top of cultural diversity, confronts internationalizing MNEs. A new sample could also include small-and-medium-size enterprises (SMEs). We found inverted U-shaped relationships for the CD-P and I-P relationships, and no significant support for S-shaped curves in our sample (cf. Kumar & Singh, 2008). Our sample consists of large MNEs that have substantial international operations and, therefore, the I-P relationship could empirically reveal only the second and third stages of the S-curve. A sample of SMEs with less international experience would permit testing whether such firms also experience the first stage of the S-curve, and to what extent cultural diversity moderates the I-P relationship for the particular circumstances of these companies. For example, the negative moderating effect could be more prominent if a firm enters a culturally distant country in the early stages of internationalization as compared to later stages. This implies that the curves (see Fig. 2) could be different for MNEs and SMEs. In conclusion, internationalization will remain crucially important for MNEs that operate in the contemporary world economy, and a thorough understanding of the impact of internationalization on MNE success remains central to IB research. With the above limitations acknowledged, we are confident that this study makes an important contribution to this line of research by explaining how the relationship between degree of internationalization and MNE performance and MNE cultural diversity varies. The impact of the degree of internationalization on firm performance is contingent on the aggregate level of cultural heterogeneity with which a firm is brought into contact as a result of its international operations.