How Firm Performance Affects Internationalization

Jae C. Jung () and Pratima Bansal
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Jae C. Jung: University of Missouri-Kansas City
Pratima Bansal: The University of Western Ontario

Management International Review, 2009, vol. 49, issue 6, No 2, 709-732

Abstract: Abstract Only a few studies have investigated whether a firm’s performance has an effect on its internationalization. These studies, focusing on actual firm performance, have suggested a resource-based argument and generally found non-significant results. In this paper, we argue that relative firm performance is critical in determining a firm’s internationalization because it influences a firm’s attitude toward risk-taking. We apply prospect theory to predict this relationship. Using time-series, cross-sectional analysis of 701 Japanese firms from 1993 to 1998, we uncovered an inverted-U shaped relationship between a firm’s relative performance and its degree of internationalization using its historical performance target. As compared to the industry target, relative performance showed a positive impact on a firm’s internationalization.

Keywords: Internationalization; Relative performance; Risk-taking; Prospect theory; Behavioral perspectives; Multinational enterprise; FDI (search for similar items in EconPapers)
Date: 2009
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Citations: View citations in EconPapers (26)

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DOI: 10.1007/s11575-009-0014-7

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