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

Sung C. Bae (Ph.D., Professor of finance in the Department of Finance at Bowling Green State University)
Bell J. C. Park (Ph.D., Executive vice president at SK D&D Corporation in Seoul, South Korea)
Xiaohong Wang (Doctoral student in the Department of Finance, Insurance, and Real Estate at the University of Florida)

Multinational Business Review

ISSN: 1525-383X

Article publication date: 11 March 2008



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.



Bae, S.C., Park, B.J.C. and Wang, X. (2008), "Multinationality, R&D Intensity, and Firm Performance: Evidence from U.S. Manufacturing Firms", Multinational Business Review, Vol. 16 No. 1, pp. 53-78.



Emerald Group Publishing Limited

Copyright © 2008, Emerald Group Publishing Limited

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