اثرات عملکرد فرایندهای توسعه بین المللی : نقش تعدیل کننده تجربه تیم مدیریت ارشد

This study investigates how experience of top management teams (TMTs) influences the performance effect of added cultural distance in international expansion processes. Taking a dynamic perspective, we focus on internationalization processes and the cultural distance that is added in expansion periods. We argue that a TMT's experience can help in coping with the complexities of added cultural distance. Based on information-processing theory, we hypothesize and find that international experience and shared team-specific experience of a TMT positively moderate the relationship between added cultural distance and firm profitability. We test our hypotheses based on cross-sectional time-series data on 3656 expansion steps of 80 German firms during the 1985–2007 period.

International business scholars have long been interested in the performance effect of international expansion. A large number of studies have investigated the impact of a firm's multinationality or degree of internationalization at a certain point in time on its profitability. However, empirical studies taking such a static perspective have yielded decidedly mixed results, including U-shaped, inverted U-shaped, S-shaped, and both positive and negative linear relationships (for recent overviews see Contractor et al., 2003, Hitt et al., 2006, Li, 2007 and Verbeke et al., 2009). Little research has taken a dynamic perspective and investigated the impact of characteristics of the process of internationalization on the profitability of multinational enterprises (MNEs) (Vermeulen & Barkema, 2002). The process of internationalization, however, is important because expanding a firm's international scope is even more complex than managing an MNE in its current state (Mishina, Pollock, & Porac, 2004). Accordingly, our results show that it is not only the level of cultural diversity at a certain point in time that affects firm performance but also the process of how this level has been achieved over a period of time. In addition, we even find that level and change in cultural diversity may actually have different effects on firm performance. This indicates that the two aspects actually constitute theoretically distinct sources of complexity, which both should be distinguished and incorporated in the study of international expansion. When first entering a foreign country, firms face liabilities of foreignness or outsidership (Johanson and Vahlne, 1977 and Johanson and Vahlne, 2009). They need to adapt to the unfamiliar locations and integrate new foreign subsidiaries into their existing international operations (Meyer, Mudambi, & Narula, 2011). At the same time, profitable firm growth is limited in a period of time (Penrose, 1959). Firms are constrained in their ability to expand and successfully cope with complexity added in the internationalization process in a limited period of time (Tan, 2003). For example, Vermeulen and Barkema (2002) and Wagner (2004) find that if firms expand too fast, i.e., undertake too many internationalization activities per period of time, their efficiency will suffer. Besides the mere number of expansion steps, the added complexity, and hence the additional costs of expanding internationally vary with the distance between newly entered markets and markets where the firm already has a presence (Ghemawat, 2001), with cultural distance, i.e., differences in national cultures between countries, being recognized as a particularly important source of complexity (e.g., Gomez-Mejia and Palich, 1997, Verbeke et al., 2009 and Yu et al., 2009). In this paper, we take a dynamic perspective and specifically focus on change. We investigate time periods and the cultural distance added by international expansion steps undertaken in those periods to address our first research question: What is the impact of complexity in the form of the amount of cultural distance added in a period of international expansion on the profitability of the expanding MNE? However, we believe that a central contingency factor in the empirical analysis of performance effects of internationalization has been largely neglected: the firm's management. It is highly relevant as complexity added in the international expansion process comes with additional information processing requirements for managers (Penrose, 1959). We believe that, in particular, a firm's top management team can make a difference since coordinating change and making strategic decisions, like expansion into foreign countries, is usually the task of the strategic apex of the organization (e.g., Barkema and Shvyrkov, 2007, Hambrick et al., 1996 and Mintzberg, 1971). Thus, it is the TMT that faces information processing requirements in the internationalization process, i.e., the need to gather, share, and attend to information, and then jointly analyze and integrate it as a team to handle complexity (Hinsz, Tindale, & Vollrath, 1997). Experience of the top management team affects its knowledge and its information processing ability, and as such its performance as a unit (Hambrick and Mason, 1984, Kor, 2003 and Stewart, 2006). As a consequence, such experience influences the team's ability to reap the benefits and cope with the costs of international expansion resulting, for instance, from cultural distance. In this way, top managers’ experience may moderate the performance effect of international expansion processes in general, and added cultural distance, in particular. Nonetheless, the role of top managers in dealing with change has received limited empirical attention in this context. This is especially surprising as multiple studies have made arguments based on managerial resources and limitations, which are key to Penrose's theory of the growth of the firm (1959), and yet they often do not include this aspect in the empirical analysis. As Hennart's review (2007) concludes, the “literature underplays the role of management”. In this paper, we directly address this issue with our second research question: How can experience of a firm's top management team moderate the relationship between added cultural distance – being one source of complexity in a period of international expansion – and firm profitability?

Firms increasingly internationalize and frequently expand into new and unfamiliar countries (Barkema & Shvyrkov, 2007). The associated complexity with such international expansion poses a challenge for managers responsible for coordinating international expansion. In this paper, we take a dynamic perspective and particularly focus on the changes in firms’ international scope and address two research questions relevant to both researchers and top managers: what is the impact of complexity in the form of the amount of cultural distance added in a period of international expansion on the profitability of the expanding MNE? and how can experience of a firm's top management team moderate the relationship between added cultural distance – being one source of complexity in a period of international expansion – and firm profitability? In this study we focus on the expansion into culturally distant countries and the strain this entails for a firm's TMT. While managing a firm in its current status is already a complex task, managing its expansion is even more difficult (Mishina et al., 2004). Thus, in comparison to prior research which predominantly examines the complexity of managing a status, we take a dynamic perspective and examine a theoretically distinct complexity in internationalization. We argue that in addition to handle the status of the firm as it is in one point in time, managing a firm's change and coordinating its international expansion in a period of time is yet another complex task which the TMT has to fulfill. In this context, cultural distance added in the international expansion process is an important source of complexity which TMTs need to cope with. Since the TMT is responsible for the coordination of international expansion as part of the firm's corporate strategy, the amount of cultural distance added in a period of time may substantially strain its members. Focusing on added cultural distance as one source of complexity, our study contributes to the literature by addressing a central characteristic of internationalization steps. We argue that steps into new and distant countries entail greater complexity and are more of a strain on managerial resources than expansion steps into familiar settings where the firm is already present. Thus, we differentiate between single expansion steps based on the cultural distance between the newly entered country and that country in the MNE's network of affiliates that it is closest to, which is not necessarily the MNE's home country. Moreover, we focus on expansion programs and not individual steps by focusing on the cultural distance added in periods of international expansion because managerial ability to cope with complexity is limited in a period of time. In line with our reasoning, the results show that the amount of cultural distance added in an international expansion period negatively affects firm profitability. The distinctive contribution of our study is the finding that the experiences of a top management team moderate the relationship between added cultural distance and firm profitability. That is, specific TMT experiences can help a firm to more successfully cope with international expansion. In this study, we focused on two types of experience, TMT international experience and shared TMT-specific experience, and showed that they exert a positive significant interactive effect on the profitability impact of a firm's internationalization process. Our results complement other works that found an association between top managers’ international experience and a firms’ multinationality at points in time (Carpenter and Fredrickson, 2001, Herrmann and Datta, 2005, Sambharya, 1996 and Tihanyi et al., 2000). Our study reveals that international experience of TMTs positively interacts with the amount of cultural distance added in periods of time. Thus extensive international experience of the TMT may mitigate the negative effect of added cultural distance on firm profitability. This suggests that international experience particularly helps in dealing with complexities in the international expansion process. Kor (2006) investigated the effect of shared team-specific experience on R&D investment strategy. She argues that TMTs with a high level of team-specific experience cope well with uncertainty of exploring new opportunities and thus invest more intensely in R&D than teams without such experience. Our results also suggest that a high level of team-specific shared experience enhances the ability to deal with uncertainty and also improves the ability to successfully manage complexities and uncertainty inherent in the international expansion processes. Taken together, our study indicates that research investigating international expansion processes based on information processing theory should take into account both the amount of information to be processed and ability to process it. In addition to implications for research on expansion processes, our results may also have relevance for researchers investigating the impact of multinationality and cultural diversity at a certain point in time on the performance of multinational enterprises. Despite a broad range of empirical studies, a consistent picture has not yet emerged (e.g., Gongming et al., 2008 and Lu and Beamish, 2004) as both positive and negative relationships between multinationality and firm performance have been found. The contradictory findings have motivated international business scholars to explore a variety of non-linear relationships, including U-shaped, inverted U-shaped, and S-shaped forms (for an overview see Contractor et al., 2003). Given the diversity of findings, Hennart (2007) has suggested that theoretically relevant factors may have been omitted in the analyses. Our results indicate that it is not only the level of cultural diversity at a certain point in time that affects firm performance but also the process of how this level has been achieved over a period of time. This implies the change in diversity or the amount of cultural distance added over time are important, but mostly neglected determinates of firm performance. Interestingly, our results even reveal that these two distinct aspects of complexity may have different performance effects. More specifically, while we conjecture and find a negative relationship between added cultural distance, which involves management of the expansion process, and firm performance, we find a positive performance effect of cultural diversity, involving the management of a status. While at first glance contradictory, this is another finding, because it provides evidence for a complex dynamic relationship between internationalization and firm performance. Expansion into highly distant countries is an important temporary strain on a firm's TMT due to greater difficulties in embedding new international subsidiaries in their external environment and in making internal adjustments to align it within the firm. However, once this assimilation and adjustment processes have been handled, the higher level of cultural diversity which has been reached through it may have a positive effect on firm performance. Nevertheless, it may take time to fully reap the benefits of being present in multiple culturally different countries. Hence, studies investigating the effect of firms’ multinationality and cultural diversity may also take into account international expansion activities in a time period before multinationality or cultural distance is measured. Furthermore, our findings suggest that the plurality of results in the literature might be explained by differences in the ability of top management teams to cope with the complexities of multinationality. Our findings may also help managers to initiate, plan, and implement international expansions. The negative performance effect of added cultural distance per period of time stems from the additional information processing requirements facing top management. Our results suggest that experience of a TMT is critical to its ability to process information as a team. As management teams differ, every TMT should carefully assess whether there is a fit between the requirements and the ability to process information before deciding on which international expansion projects to undertake. Our results are also directly relevant for CEOs and the supervisory boards that nominate or appoint top managers. For example, our results show that the negative effect of added cultural distance can be greatly mitigated by appointing a TMT with an amount of international experience or with shared team-specific experience that is one standard deviation above the mean.