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Resource indivisibility, lumpy costs and the multinationality–performance relationship

Ohad Ref (Faculty of Business Administration, Ono Academic College, Kiryat Ono, Israel)
Itzhak Gnizy (Faculty of Business Administration, Ono Academic College, Kiryat Ono, Israel)

International Marketing Review

ISSN: 0265-1335

Article publication date: 27 January 2021

Issue publication date: 20 May 2021

149

Abstract

Purpose

The relationship between multinationality and firm performance is a central issue in the international marketing and business literatures. Predominantly, this body of research has tried to identify a single, generalized pattern for this relationship. However, despite the vast number of studies, results have been characterized as mixed or inconsistent. In this study, we take a fresh look at this relationship.

Design/methodology/approach

We focus on a key inducement to expand firm multinationality – the search for a more efficient way to exploit firm resources, and also on a specific operationalization of multinationality – firm geographic scope. We use a formal analytical model analyzing the trade-off between benefits and costs arising from expanding firm geographic scope and emphasizing the role of lumpy costs emanating from resource indivisibility.

Findings

The relationship between geographic scope and performance cannot be confined to a single pattern, but instead, may have any one of a set of patterns: negatively monotonic shape, inverted U-shape, S-shape, M-shape or, multiple-wave inverted U-shape.

Practical implications

The current study offers managers some guidelines to identify which of the above patterns fits their firm's specific case, and to identify the optimal level of geographic scope for their firm.

Originality/value

We conclude that the search for a single, generalized pattern for multinationality-performance is largely futile, whereas the focus on specific inducements and operationalizations for multinationality allows us to explain when and why specific patterns are more likely to occur.

Keywords

Acknowledgements

We are most grateful to IMR Editor John W. Cadogan and two thoughtful reviewers for providing excellent feedback. We also thank Heather Berry, Niron Hashai, and Matan Ref for all their helpful comments on earlier versions of this article. All errors remain our own.This study was supported by the Research Center of The Faculty of Business Administration at the Ono Academic College.

Citation

Ref, O. and Gnizy, I. (2021), "Resource indivisibility, lumpy costs and the multinationality–performance relationship", International Marketing Review, Vol. 38 No. 3, pp. 539-563. https://doi.org/10.1108/IMR-05-2020-0094

Publisher

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Emerald Publishing Limited

Copyright © 2020, Emerald Publishing Limited

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