Geographic Scope of Operations by Multinational Companies:: An Exploratory Study of Regional and Global Strategies

In recent years, there has been an emerging stream of studies that challenge the idea of the importance of globalization for companies. One study even calls the common assumptions of globalization a "myth" (Rugman, A., 2000). Needless to say, this particular perspective has generated a lot of interest and debate. The present study seeks to review the regionalization strategies of the world's largest MNCs and answer the following two empirical questions: What is the relationship between regionalization and global operations and performance? and What are the significant differences across MNCs that are regionalized in their operations relative to those that are not? Using a sample of 130 firms derived from the Directory of Multinationals listing of the largest multinationals in the world, hierarchical/sequential regression models and cluster analysis were used in the testing of hypotheses. Contrary to expectations, study findings indicate that an MNC's global (i.e., non-regional) operations have higher profit margins than regional operations. Study findings also indicate that three distinct types of MNCs exist, namely: regional, global, and home-based. As argued by the proponents of regionalization, roughly 49% of the MNCs studied had a regional scope in international operations. Implications for theory and practice are presented.