A three-stage theory of international expansion: the link between multinationality and performance in the service sector

Farok J Contractor, Sumit K Kundu and Chin-Chun Hsu
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Farok J Contractor: School of Management, RutgersUniversity, USA
Sumit K Kundu: Boeing Institute of InternationalBusiness, John Cook School of Business, Saint Louis University, USA
Chin-Chun Hsu: [1] 2Boeing Institute of InternationalBusiness, John Cook School of Business, Saint Louis University, USA [2] 3The Overseas Chinese Institute ofTechnology, Taiwan, ROC

Journal of International Business Studies, 2003, vol. 34, issue 1, 5-18

Abstract: It is generally assumed that the performance of a firm improves with greatermultinationality. Yet recent empirical studies have shown both a U-shapedrelationship (which suggests an initially negative effect of international expansionon performance, before the positive returns of international expansion arerealized) and an inverted-U-shaped relationship (which suggests thatinternational expansion beyond an optimal level is again detrimental toperformance, and results in a negative slope). This paper proposes a new unifiedthree-stage theory of international expansion that incorporates both concepts in asigmoid hypothesis. It then tests this on data from 11 service industries,highlighting the difference between knowledge-based and capital-intensiveservice sectors. Journal of International Business Studies (2003) 34,5–18. doi:10.1057/palgrave.jibs.8400003

Date: 2003
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