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The Relationship between Multinationality and Performance: Knowledge-Intensive vs. Capital-Intensive Service Micro-Multinational Enterprises

Author

Listed:
  • Joon-Ho Shin

    (ESADE Barcelona - Sant Cugat)

  • Xavier Mendoza

    (ESADE Barcelona - Sant Cugat)

  • Matthew Hawkins

    (ICN Business School, CEREFIGE - Centre Européen de Recherche en Economie Financière et Gestion des Entreprises - UL - Université de Lorraine)

  • Changbum Choi

    (Chung-Ang University [Seoul])

Abstract

This research explores the relationship between multinationality and firm performance (M-P) in the context of micro-multinational enterprises (mMNEs) within the service sector. We examine the moderating effects of industry characteristics using a data set of 1082 Spanish service mMNEs over an eight-year period. The empirical results provide statistical evidence that knowledge-intensive service mMNEs exhibit an inverted U-shaped M-P relationship, while capital-intensive service mMNEs present a U-shaped relationship. Our findings demonstrate that knowledge-intensive service mMNEs increase their performance in the initial stage of multinationality, encounter a threshold of internationalization at relatively low levels of multinationality and have a propensity to over-internationalize. By comparison, capital-intensive service mMNEs experience negative performance effects at low levels of multinationality and positive ones as they further internationalize. Given that their operations are scale-sensitive, they tend to expand internationally by concentrating their operations in few foreign markets as a means to overcome the liabilities of internationalization and smallness. We contribute to the literatures on multinationality research in the service sector and on SME internationalization by showing that the effects of multinationality on the performance of mMNEs depend on industry characteristics and that such contextual factors provide a better understanding of the M-P relationship.

Suggested Citation

  • Joon-Ho Shin & Xavier Mendoza & Matthew Hawkins & Changbum Choi, 2017. "The Relationship between Multinationality and Performance: Knowledge-Intensive vs. Capital-Intensive Service Micro-Multinational Enterprises," Post-Print hal-01515121, HAL.
    • Handle: RePEc:hal:journl:hal-01515121
    DOI: 10.1016/j.ibusrev.2017.02.005
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    Citations

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    Cited by:

    1. Likitwongkajon, Napaporn & Vithessonthi, Chaiporn, 2021. "The short- and long-run effects of foreign investments on firm performance: Evidence from Asia Pacific," International Review of Economics & Finance, Elsevier, vol. 75(C), pages 366-385.
    2. Afrifa, Godfred Adjapong & Amankwah-Amoah, Joseph & Yamoah, Fred & Acquaye, Adolf & Syllias, Johnny & Quaye, Enoch Nii Boi, 2022. "Regional development, innovation systems and service companies’ performance," Technological Forecasting and Social Change, Elsevier, vol. 174(C).
    3. Seymur AÄŸazade, 2022. "The effect of tourism source market structure on international tourism revenues in Turkey," Tourism Economics, , vol. 28(3), pages 714-727, May.
    4. Yi, Liqi & Li, Tao & Zhang, Ting, 2021. "Optimal investment selection of regional integrated energy system under multiple strategic objectives portfolio," Energy, Elsevier, vol. 218(C).
    5. Vanninen, Heini & Keränen, Joona & Kuivalainen, Olli, 2022. "Becoming a small multinational enterprise: Four multinationalization strategies for SMEs," International Business Review, Elsevier, vol. 31(1).
    6. Stoian, Maria-Cristina & Dimitratos, Pavlos & Plakoyiannaki, Emmanuella, 2018. "SME internationalization beyond exporting: A knowledge-based perspective across managers and advisers," Journal of World Business, Elsevier, vol. 53(5), pages 768-779.
    7. Ziyi Wei & Quyen T. K. Nguyen, 2020. "Chinese Service Multinationals: The Degree of Internationalization and Performance," Management International Review, Springer, vol. 60(6), pages 869-908, December.
    8. Chikondi Ng’ombe & Theunis Mans & Helena Barnard, . "Greater risk and a smaller opportunity: The opportunity space of SME internationalization in lower-income countries," UNCTAD Transnational Corporations Journal, United Nations Conference on Trade and Development.
    9. Alice Schmuck & Katarina Lagerström & James Sallis, 2022. "Turning the Tables: The Relationship Between Performance and Multinationality," Management International Review, Springer, vol. 62(1), pages 3-26, February.
    10. Joonho Shin & Xavier Mendoza & Changbum Choi, 2022. "Do internationalizing business group affiliates perform better after promarket reforms? Evidence from Korean SMEs," Asia Pacific Journal of Management, Springer, vol. 39(2), pages 805-841, June.
    11. Ji, Junzhe & Li, Nicolas & Liouka, Ioanna & Fletcher, Margaret & Tang, Yee Kwan & Slow, Jonathan, 2021. "“Where to” micromultinationals? A tribute to Professor Pavlos Dimitratos," European Management Journal, Elsevier, vol. 39(4), pages 404-409.
    12. Sushma Kumari & Vikrant Shirodkar & Steven McGuire, 2023. "Pre-Liberalization Foundations and the FDI-Based Internationalization of SMEs from Emerging Markets," Management International Review, Springer, vol. 63(4), pages 641-671, August.
    13. Xu, Yanjing & Zhu, Jianming & Mou, Jian, 2021. "Factors influencing bid-winning performance in mixed crowdsourcing: The persuasive effect of credible information sources," Technology in Society, Elsevier, vol. 65(C).
    14. Powell, K. Skylar & Lim, Eunah, 2018. "‘Misfits’ DO try to fit: Deviations from firm-specific optimal multinationality and subsequent market entry or exit in US law firms," Journal of Business Research, Elsevier, vol. 82(C), pages 141-148.
    15. Ando, Naoki, 2024. "Multinationals’ intraregional geographic expansion and foreign subsidiary performance," International Business Review, Elsevier, vol. 33(1).
    16. Zhang, Yufeng & Yang, Zhibo & Zhang, Tao, 2018. "Strategic resource decisions to enhance the performance of global engineering services," International Business Review, Elsevier, vol. 27(3), pages 678-700.

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