International Dispersion and Profitability: An Institution-Based Approach

Raquel García-García (), Esteban García-Canal and Mauro F. Guillén
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Raquel García-García: The Open University Business School
Esteban García-Canal: University of Oviedo
Mauro F. Guillén: University of Pennsylvania

Management International Review, 2019, vol. 59, issue 6, No 1, 855-888

Abstract: Abstract This study examines the effect of international dispersion on profitability. We use an institution-based approach to propose that increases in international dispersion lead, on average, to profitability downturns. We also argue that this liability of foreignness will affect multinationals from infrastructure industries to a lesser extent because in these industries: (1) the importance of cultural fit in products is low; (2) firms possess regulatory expertise; and (3) firms have limited aggregation opportunities at the regional level. We test our hypotheses on a panel of Spanish listed firms (1986–2007). Our findings point to a negative linear relationship between international dispersion and profitability, which is flatter for infrastructure multinationals. These results contribute to a more context-based understanding of internationalization that highlights the shortcomings of establishing a dispersed international footprint.

Keywords: Internationalization; Profitability; Liability of foreignness; Regionalization; Institution-based view; Infrastructure firms (search for similar items in EconPapers)
Date: 2019
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DOI: 10.1007/s11575-019-00402-w

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