Advancing empirical research in international business

Citation

Rugman, A.M. (2012), "Advancing empirical research in international business", Multinational Business Review, Vol. 20 No. 4. https://doi.org/10.1108/mbr.2012.57220daa.001

Advancing empirical research in international business

Article Type: Letter from the Editor From: Multinational Business Review, Volume 20, Issue 4

The lead paper in this issue of MBR is by Paloma Almodóvar. In a unique integration of work in international marketing, international business, and strategic management, she explores the performance of separate sets of standardizing versus customizing firms. In careful original empirical work, she finds that there is a standard M curve relationship between the degree of internationalization (DOI) and firm performance. In contrast, for customizing firms, she finds a significant inverted M curve relationship between DOI and performance.

Of particular interest in this paper is the careful theoretical development and hypotheses explaining the four phases and turning points of each of these M curves. This theoretical work, largely developed in the international business domain, has previously been neglected in the international marketing literature. At MBR we are pleased to offer these new concepts to our colleagues in international marketing. To advance such empirical work across functional fields increasingly dominated by a narrow “silo” mentality requires imaginative new thinking as demonstrated so ably in the paper by Paloma Almodóvar.

The second paper, by Alina Kudina, also examines the relationship between multinationality (DOI) and performance but within the more conventional confines of international business research. In conducting such research on the performance of multinational firms, it is now well established that the explanatory variable called “multinationality” needs to be adjusted to account for the home region effect. In her interesting contribution to this literature, Alina Kudina addresses four unresolved empirical issues in this relatively new area of research.

First, in measuring performances she uses firm level accounting data on the return on assets and return on sales of large multinational enterprises. These data are taken from the somewhat neglected OSIRIS database. These accounting data need to be treated with care, as discussed in point four below.

Second, Kudina divides the sales and assets of multinational firms into those taking place in the rest of the home region (R/T) and the rest of the world (G/T). She does this to eliminate sales in the home country. While this, indeed, partly overcomes the unique problem of the US being a dominant force in the North American region of the triad, it makes the analysis largely irrelevant for all other countries in the world. In other words, in order to successfully incorporate data for US multinationals this analysis wastes valuable data for all other multinationals. However, Kudina’s approach is superior to that of others who use up to ten regions; she uses only the home region, and the rest of the world. In practice, only the triad regions matter.

Third, Kudina states correctly that the number of countries in which there is a subsidiary, and the total number of subsidiaries, are poor metrics for multinationality. However, she includes them as control variables but finds that they are insignificant in explaining performance. Instead, she finds that there is a linear relationship between performance and both return on assets and return on sales. It is somewhat surprising that she does not find the S shape (or M shape) relationships being reported in recent studies, including in MBR.

Fourth, Kudina grapples with the familiar problem that her data on performance is for the consolidated accounting data of multinational firms. She apparently reports no breakdown of performance data for rest of the region (ROR) and rest of the world (G/T). In particular, there are no separate data reported on home country performance. Thus the multinationality metrics (R/T and G/T) are not formally aligned to separate performance metrics in these categories. Apparently, only the overall corporate performance is reported.

In summary, the paper by Alina Kudina wrestles with unresolved issues in the empirical work on multinationality and regional versus global performance. This is an area of ongoing interest at MBR and we publish this paper as a further contribution to the unfinished debate about regional versus global strategy and performance.

The third paper, by Xiaoming He and Lin Cui, uses institutional theory to examine the relationship between internationalization and home country specific advantages (CSAs). In this case the key CSA examined is a strong regulatory framework. The authors examine six types of regulatory governance CSAs across large multinationals, again from the OSIRIS database. They find that strong home country regulatory governance institutions directly affect the international expansion of firms.

The fourth paper in this issue, by François Outreville, examines the net benefits of international (geographic) diversification for the world’s largest reinsurance companies. This paper also has to wrestle with still unresolved theoretical and empirical issues, some 40 years after the initial empirical papers on international diversification, back in the 1970s. It would appear that bridging the gap between international business literature and international finance still remains a challenge.

Overall, the four empirical papers help us to continue advancing our insights into the nature of international business activity and the performance of both large MNEs and smaller exporting firms. They also demonstrate that empirical work needs to be closely aligned to good theory. The first paper is the most challenging to publish as it incorporates truly interdisciplinary thinking, which is the most difficult for referees and editors to assess. At MBR we are pleased to meet this challenge.

Alan M. RugmanEditor-in-Chief