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Firm internationalization approaches and performance: the moderating role of the home country's formal institutions

Henrique Correa da Cunha (Department of Global Management, Ted Rogers School of Management, Toronto Metropolitan University, Toronto, Canada)
Mohamed Amal (Department of Economics and Business (CCSA), Regional University of Blumenau- FURB, Blumenau, Brazil)
Dinorá Eliete Floriani (PMPGIL, Universidade do Vale do Itajai, Balneário Camboriú, Brazil)
Maria Tereza Leme Fleury (Department of Management, Escola de Administracao de Empresas de Sao Paulo, Fundacao Getulio Vargas, Sao Paulo, Brazil)

International Journal of Emerging Markets

ISSN: 1746-8809

Article publication date: 6 February 2023




This study investigates how the degree of internationalization (DOI) affects the financial performance of emerging market companies by making the distinction between export intensity and multinationality (i.e. foreign direct investment). The authors argue that the different DOI-performance patterns in the literature relate to different internationalization approaches, which are moderated in distinct ways by formal institutions in the home country.


Based on data of Brazilian firms in several industries and with different internationalization patterns including 100 exporting firms and 30 multinational companies with varying degrees of multinationality over a period of five consecutive years, the authors test their hypotheses using an unbalanced panel data with 346 firm-year observations. In order to test how the quality of formal institutions moderate the DOI-performance relationships, the authors estimate the changes in the slope of the regression line by adding and subtracting one standard deviation to the Worldwide Governance Indicators (WGI) variables.


A positive and linear association between export intensity-performance (EI-P) highlights the location specific comparative advantages of exporting Brazilian firms, while the multinationality-performance (M-P) relationship points to a horizontal S-shape pattern which conforms to the theoretical assumptions of the three-stage internationalization process. Formal institutions moderate positively the EI-P relationship, but moderate negatively each of the three stages of the M-P relationship.

Research limitations/implications

The findings from this study provide critical insights that contribute to the ongoing debate on how formal institutions in the home country affect the DOI-performance relationship of emerging market companies (EMCs). However, the authors consider that it has limitations as they focused exclusively on formal institutions captured by governance institutions in the Brazilian context.

Practical implications

This study provides relevant insights to managers and policy makers. Findings reveal that strong formal institutions in the home country make it easier (cheaper) for EMCs to invest abroad, and, at the same time, increase the efficiency of exporting firms and positively influence financial performance. Moreover, results show that during downturns in their domestic markets, multinational EMCs outperform domestic firms. In that sense, while policy makers can promote the internationalization and competitiveness of EMCs by implementing more supportive formal institutions, managers should consider a proactive approach and invest abroad when conditions in the home country are favorable.


By making the distinction between export intensity and multinationality this study contributes to the literature on the DOI-performance of EMCs providing a more nuanced view on how formal institutions in the home country moderate the EI-P and M-P relationships in different ways.



The authors would like to thank the Editor-in-Chief Ilan Alon, the senior editors Pooja Thakur-Wernz, Stefano Elia and three anonymous reviewers for their insightful comments and contributions.


Correa da Cunha, H., Amal, M., Floriani, D.E. and Fleury, M.T.L. (2023), "Firm internationalization approaches and performance: the moderating role of the home country's formal institutions", International Journal of Emerging Markets, Vol. ahead-of-print No. ahead-of-print.



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