Does international expansion constrain growth? Business groups, internationalization, institutional distance, and the Penrose effect
ISSN: 1525-383X
Article publication date: 5 September 2020
Issue publication date: 7 January 2021
Abstract
Purpose
This paper aims to use the institutional and information-processing perspectives to explore their association with between internationalization and the Penrose effect phenomenon for business groups (BGs).
Design/methodology/approach
The authors use ordinary least squares regression models to test arguments about data pertaining to 101 Taiwanese BGs’ foreign direct investments.
Findings
The results indicate that greater levels of depth and scope in the process of internationalization during one period may negatively affect rates of growth in the following period. The results further demonstrate that institutional distance moderates the relationship.
Research limitations/implications
Using the perspective of information-processing demands, the authors provide alternate explanations regarding the relationship between the process of internationalization (depth, scope and rhythm) and the Penrose effect.
Originality/value
Owners and managers should focus on both the depth and the scope of internationalization. BGs are likely to incur high dynamic adjustment costs, which then limit the rate of BGs’ growth. Managers should balance international market uncertainty with current managerial resources when determining how deeply and broadly to expand internationally and where to enter. In addition, as recent major panel studies suggest, management capabilities and practices can improve significantly, which has a positive effect on firm growth and performance. This does require the careful development and acquisition of the managerial resources needed for internationalization.
Keywords
Citation
Lin, W.-T., Chen, Y.-Y., Ahlstrom, D. and Wang, L.C. (2021), "Does international expansion constrain growth? Business groups, internationalization, institutional distance, and the Penrose effect", Multinational Business Review, Vol. 29 No. 1, pp. 70-95. https://doi.org/10.1108/MBR-11-2019-0163
Publisher
:Emerald Publishing Limited
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