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In this paper, I address issues concerning the empirical estimation of a relationship between firm performance and its degree of multinationality. I argue for greater delineation of the underlying nature of firms’ multinationality and point to several statistical issues regarding estimation that appear to need resolution, but which appear to have been largely neglected in the literature that has examined for a multinationality–performance relationship. Among these are endogeneity of the multinationality construct in the performance relationship and the likelihood that the multinationality–performance relationship is heterogeneous across firms.

The main objective of the present chapter is to address empirically the impacts of institutional distance (ID) on the multinationality level of firms from developing countries and interpret how the interaction between ID and firm resources affects firms from developing countries. Using data of firms from developing countries, we estimated an empirical cross-section model. The results show that while cultural distance was not found statistically significant, ID, on the other hand, was statistically significant. The higher the distance between home and host country, the higher the multinationality of firms from developing countries. We also found a positive and statistically significant correlation between intangible resource and multinationality, which suggests a tendency toward new pattern in the internationalization of firms from emerging economies.

In the field of international business one of the most basic issues is the relationship between multinationality and performance. Several hundred studies have examined the nature of this relationship, with somewhat inconclusive results. This literature is reviewed and extended in Part B of this book. However, the main contribution of this book lies in Parts A and C which explore the regional dimension of multinationality and performance.

This paper offers a discussion of the key multilevel issues pertaining to the multinationality–performance (M–P) relationship. Arguably, one of the most important areas of research in international business, firm internationalization and its consequences are multilevel phenomena, influenced by forces at different managerial and structural levels: from the executive, subsidiary and firm, to the country and industry. We suggest that accounting for important factors at each level and for their cross-level interactions may help reconcile inconsistent findings and advance our understanding of the M–P relationship. Based on a critical review of the literature, we offer recommendations regarding the appropriate levels of theory, measurement, and analysis to guide future research.

The traditional dependent variable in the multinationality and performance literature is the ratio of foreign (F) to total (T) sales, (F/T). This can now be supplemented by a new regional variable, the ratio of regional (R) to total (T) sales, i.e. (R/T). Data are presented on both (F/T) and (R/T) for both sales and assets for a five-year period, 2001–2005. Implications are drawn for future research on multinationality and performance in the light of this regional phenomenon.

We examine how the international financial crisis of 2007–2010 has impacted on the performance of emerging market MNCs relative to their developed market counterparts. We present our multinational classification system and categorise the world's largest firms, the Global Fortune 500 (GF500), according to their degree of multinationality. We show that the number of GF500 firms from emerging markets has increased significantly over the past decade, and that the international financial crisis of 2007–2010 has further enhanced this trend. We compare the relative risk-adjusted performance of emerging and developed markets before and since the international financial crisis. We show that although the GF500 firms from developed markets tend to be more multinational than the GF500 firms from emerging markets, the latter have outperformed the former over the past decade – both before and after the recent international financial crisis.

We start by looking at the arguments put forth as to why having operations evenly spread in a large number of countries should make firms more profitable. Kim, Hwang, and Burgers (1993) argue, for example, that global market diversification, which they measure as the dispersion of a firm's business between seven global market areas, provides a series of advantages that should allow globally diversified firms to earn both higher return on assets and lower risk. Because their arguments are complex and multifaceted, I cite them in extenso.First, global market diversification offers possibilities for exploitation of economies of scale and scope above and beyond the potential of product diversification (Grant, Jammine, & Thomas, 1988). Second, the diversity of national markets exposes firms to multiple stimuli which provides [sic] with a broader learning opportunity and the ability to develop more diverse capabilities than are available to purely domestic firms…. Third, different nations have different factor endowments which, in the absence of efficient markets, lead to intercountry differences in factor costs. Global market diversification allows firms to gain cost advantages by configuring their value added chain in such a way that each link is located in the country which has the least cost for that link (Kogut, 1985a). Global market diversification thus provides firms with unique opportunities to increase returns by spreading its [sic] activities [emphasis in original] across multiple global market areas, rather than by choosing higher risk activities.At the same time, global market diversification endows firms with three unique options [emphasis in original] over domestic firms which are reasoned to reduce the level of corporate risk. First, global market diversification provides a firm with multiple national market bases from which it can retaliate against aggressive moves made by competitors (Hamel & Prahalad, 1985; Kim & Mauborgne, 1988). This option reduces the risk for the global firm of having to face aggressive challenges from its competitors. Second, the multiplicity of national markets allows firms to minimize the effect of adverse changes in a country's interest rates, wage rates, and commodity and raw material prices by providing the added option to more readily shift production and sourcing sites to other more favorable national markets (Kogut, 1983, 1985b; Porter, 1986). Finally, global market diversification releases firms from the mercy of supply and demand fluctuations of any one national market, smoothing the peaks and troughs of firms’ revenue streams. In sum, the spreading of activities across global market areas provides the firm with operational flexibilities that will serve to reduce earning and profit fluctuations. Taken together, the above discussions suggest that the unique opportunities and options of global market diversification may simultaneously increase firms’ returns and reduce their risk.” (Kim et al., 1993, pp. 276–277)

The application of real options theory to international strategy has surged in recent years. However, it is still a relatively new and loosely defined field, and there are several constraints on practical applications of this powerful theory. To move forward this field, the paper first provides a systematic analysis of theoretical and empirical contributions of real options theory to three critical issues in international strategy: (1) valuing multinational networks, (2) assessing market entry modes, and (3) evaluating market entry timing. The paper further suggests that future studies can focus on a refined treatment of uncertainty and the development of a dynamic theory in international strategy. Five testable propositions are developed in these directions.

This chapter develops a multi-path theory of diversified international expansion that explains how multiple wave-shaped performance curves are created as multinational companies expand into increasingly distant and dissimilar countries. According to this theory, multinational mobile network operators (MNOs) recover from over-diversified expansion by improving their local adaptation strategies by means of reconfiguring the value chain and entering local partnerships, by improving their global replication capabilities or by concentrating expansion to clusters of similar country markets. Three dynamic propositions are developed and exemplified concerning MNOs’ diversified international expansion. Implications for international diversification research finalize the chapter.

We contend that the concept of liability of foreignness is inadequate to describe the set of disadvantages faced by emerging economy multinational enterprises (MNEs) in international markets. In order to address this theoretical gap, we develop the concept of “liabilities of origin” (LOR). We propose that the concept of LOR explains how the national origins of the MNE shape its disadvantages in international markets through three distinctive contexts of the MNE's ongoing activity: the home country context, the host country context, and the organizational context. We argue that in order to understand how emerging economy MNEs overcome their LOR, we need to engage simultaneously with the theoretical perspectives provided by the institutional entrepreneurship and organizational identity literatures. We suggest, further, that the concept of LOR may be useful to understand the character of MNE disadvantage in any international foray where the national origins of the MNE engender legitimacy-based and capability-based disadvantages for the MNE in a host country.