Journal Article

A Three-Stage Theory of International Expansion: The Link between Multinationality and Performance in the Service Sector

Contractor, Farok J., Hsu, Chin-Chun, Kundu, Sumit K.

2003

Overview

It is generally assumed that the performance of a firm improves with greater multinationality. Yet recent empirical studies have shown both a U-shaped relationship (which suggests an initially negative effect of international expansion on performance, before the positive returns of international expansion are realized) and an inverted-U-shaped relationship (which suggests that international expansion beyond an optimal level is again detrimental to performance, and results in a negative slope). This paper proposes a new unified three-stage theory of international expansion that incorporates both concepts in a sigmoid hypothesis. It then tests this on data from 11 service industries, highlighting the difference between knowledge-based and capital-intensive service sectors.

• Publisher: Academy of International Business, Copenhagen Business School, Copenhagen Denmark, and the McDonough School of Business, Georgetown University,Palgrave Macmillan UK,Palgrave Macmillan
• Subject: Advertising research / Arbitrage / Business and Management / Business education / Business metrics / Business Strategy/Leadership / Business structures / Business studies / Corporate planning / Costs / Countries / Economic theory / Enterprises / Expansion / Finance companies / Financial services / Global corporations / Globalization / Hypotheses / International / International Business / Knowledge / Management / Multinational corporations / Multinational enterprises / Organization / Organizational effectiveness / Original Article / Periodical indexing / Profits / Restaurants / Return on investment / Service industries / Service industry / Shipping / Stage theory / Studies