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Multinationality, R&D Intensity, and Firm Performance: Evidence from U.S. Manufacturing Firms

Multinationality, R&D Intensity, and Firm Performance: Evidence from U.S. Manufacturing Firms We examine whether firms’ multinationality leads to better performance and what the role of R&D investment is in the multinationality performance linkage. Unlike the previous studies, we employ both accounting‐ and market‐based measures of firm performance for a large sample of U.S. manufacturing firms. Our results show that the empirical relation between multinationality and performance is not monotonic but varies with the phase of a firm’s multinationality, starting with a negative relation initially, followed by a positive one, and then again a negative one. This horizontal S‐shaped curvilinear relation of multinationality is more pronounced for the market‐based performance measure and is supportive of the three‐stage theory of internationalization. We also find that a firm’s multinationality is related to greater firm performance when the firm possesses R&D investment, and that the effect of R&D increases with the extent of a firm’s multinationality. These results lend strong support for the Internalization theory and the resource‐based view of firms’ international expansion. Our results are robust to different model specifications with an alternative measure of multinationality. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Multinational Business Review Emerald Publishing

Multinationality, R&D Intensity, and Firm Performance: Evidence from U.S. Manufacturing Firms

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References (44)

Publisher
Emerald Publishing
Copyright
Copyright © 2008 Emerald Group Publishing Limited. All rights reserved.
ISSN
1525-383X
DOI
10.1108/1525383X200800003
Publisher site
See Article on Publisher Site

Abstract

We examine whether firms’ multinationality leads to better performance and what the role of R&D investment is in the multinationality performance linkage. Unlike the previous studies, we employ both accounting‐ and market‐based measures of firm performance for a large sample of U.S. manufacturing firms. Our results show that the empirical relation between multinationality and performance is not monotonic but varies with the phase of a firm’s multinationality, starting with a negative relation initially, followed by a positive one, and then again a negative one. This horizontal S‐shaped curvilinear relation of multinationality is more pronounced for the market‐based performance measure and is supportive of the three‐stage theory of internationalization. We also find that a firm’s multinationality is related to greater firm performance when the firm possesses R&D investment, and that the effect of R&D increases with the extent of a firm’s multinationality. These results lend strong support for the Internalization theory and the resource‐based view of firms’ international expansion. Our results are robust to different model specifications with an alternative measure of multinationality.

Journal

Multinational Business ReviewEmerald Publishing

Published: Mar 11, 2008

Keywords: Multinationality; Firm performance; R&D investment; Internalization theory; International expansion

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