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International diversification and performance: A study of global law firms

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Author Info

  • Brock, David M.
  • Yaffe, Tal
  • Dembovsky, Mark
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    Abstract

    This paper is an exploration of the internationalization-performance relationship in the context of contemporary knowledge intensive services. After background literature, we build theory in the context of service firms to explain how performance in international diversification largely depends on building various relevant organizational competencies. We develop two hypotheses: one concerning a reverse u-shaped internationalization-performance function for these firms in general, and another differentiating between U.S. and U.K. firms. Data on 76 U.S. and 13 U.K. firms are analyzed using hierarchical regression. The findings sustain the reverse u-shaped internationalization-performance relationship for these firms in general, but also suggest that the prospects are quite different for U.S. versus U.K. firms. Our findings add to an emerging stream of research that indicates a resolution to the hitherto ambiguous internationalization-performance relationship; and we also suggest a convergence between findings in capital-intensive and knowledge-intensive industries. The paper concludes with some implications for practitioners.

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    Bibliographic Info

    Article provided by Elsevier in its journal Journal of International Management.

    Volume (Year): 12 (2006)
    Issue (Month): 4 (December)
    Pages: 473-489

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    Handle: RePEc:eee:intman:v:12:y:2006:i:4:p:473-489

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    Related research

    Keywords: Internationalization Diversification Law firms;

    References

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    1. N Capar & M Kotabe, 2003. "The relationship between international diversification and performance in service firms," Journal of International Business Studies, Palgrave Macmillan, vol. 34(4), pages 345-355, July.
    2. MB Sarkar & S Tamer Cavusgil & Preet S Aulakh, 1999. "International Expansion of Telecommunication Carriers: The Influence of Market Structure, Network Characteristics, and Entry Imperfections," Journal of International Business Studies, Palgrave Macmillan, vol. 30(2), pages 361-381, June.
    3. Jose Manuel Campa & Simi Kedia, 2002. "Explaining the Diversification Discount," Journal of Finance, American Finance Association, vol. 57(4), pages 1731-1762, 08.
    4. Catherine Matraves & Peter Rodriguez, 2005. "Profitability, Diversification, and Multinationality in Leading German and UK Firms," International Journal of Business and Economics, College of Business, and College of Finance, Feng Chia University, Taichung, Taiwan, vol. 4(2), pages 87-105, August.
    5. Luo, Yadong, 2002. "Organizational dynamics and global integration: A perspective from subsidiary managers," Journal of International Management, Elsevier, vol. 8(2), pages 189-215.
    6. Farok J Contractor & Sumit K Kundu & Chin-Chun Hsu, 2003. "A three-stage theory of international expansion: the link between multinationality and performance in the service sector," Journal of International Business Studies, Palgrave Macmillan, vol. 34(1), pages 5-18, January.
    7. John R. Graham & Michael L. Lemmon & Jack G. Wolf, 2002. "Does Corporate Diversification Destroy Value?," Journal of Finance, American Finance Association, vol. 57(2), pages 695-720, 04.
    8. Nachum, Lilach, 2003. "Does nationality of ownership make any difference and, if so, under what circumstances?: Professional service MNEs in global competition," Journal of International Management, Elsevier, vol. 9(1), pages 1-32.
    9. Frances A Katrishen & Nicos A Scordis, 1998. "Economies of Scale in Services: A study of Multinational Insurers," Journal of International Business Studies, Palgrave Macmillan, vol. 29(2), pages 305-323, June.
    10. Blomstermo, Anders & Eriksson, Kent & Lindstrand, Angelika & Sharma, D. Deo, 2004. "The perceived usefulness of network experiential knowledge in the internationalizing firm," Journal of International Management, Elsevier, vol. 10(3), pages 355-373.
    11. Hadley, Richard D. & Wilson, Heather I. M., 2003. "The network model of internationalisation and experiential knowledge," International Business Review, Elsevier, vol. 12(6), pages 697-717, December.
    12. Masaaki Kotabe & Srini S Srinivasan & Preet S Aulakh, 2002. "Multinationality and Firm Performance: The Moderating Role of R&D and Marketing Capabilities," Journal of International Business Studies, Palgrave Macmillan, vol. 33(1), pages 79-97, March.
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    Cited by:
    1. Chao, Mike Chen-Ho & Kumar, Vikas, 2010. "The impact of institutional distance on the international diversity-performance relationship," Journal of World Business, Elsevier, vol. 45(1), pages 93-103, January.
    2. LiPuma, Joseph A., 2012. "Internationalization and the IPO performance of new ventures," Journal of Business Research, Elsevier, vol. 65(7), pages 914-921.
    3. Christian Genthon, 2008. "International diversification, performance and offshoring : the case of the computer services industry," Post-Print halshs-00348198, HAL.
    4. Wang, Chi-Feng & Chen, Li-Yu & Chang, Shao-Chi, 2011. "International diversification and the market value of new product introduction," Journal of International Management, Elsevier, vol. 17(4), pages 333-347.
    5. Segal-Horn, Susan & Dean, Alison, 2009. "Delivering 'effortless experience' across borders: Managing internal consistency in professional service firms," Journal of World Business, Elsevier, vol. 44(1), pages 41-50, January.
    6. Lin, Wen-Ting & Liu, Yunshi & Cheng, Kuei-Yang, 2011. "The internationalization and performance of a firm: Moderating effect of a firm's behavior," Journal of International Management, Elsevier, vol. 17(1), pages 83-95, March.

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