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Experienced ‘misfits’: Multinationality alignment, international experience, and adjustments to multinationality

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  • Skylar Powell, K.
  • Takahashi, Hidenori
  • Lim, Eunah

Abstract

Transaction cost and internalization theory offers that firm-specific transaction-cost factors determine firm-specific optimal levels of multinationality. Decision makers should prefer alignment with optimal levels of multinationality. Yet, some firms continuously misalign with their optimal levels of multinationality. We argue that having multiple preferences may explain these ‘misfit’ firms. Specifically, firms with international experience may develop an inertial preference for further international growth, along with their preference for efficiency/optimization. Hence, more internationally experienced firms with insufficient multinationality will increase their levels of multinationality in subsequent time periods to satisfy both preferences. However, growth preferences in more internationally experienced firms with excess multinationality will counter optimization preferences, reducing the likelihood of decreases to levels of multinationality in subsequent periods. We find support for these ideas in the context of 242 Japanese electrical appliance firms between 2011 and 2019 (1401 firm-year observations).

Suggested Citation

  • Skylar Powell, K. & Takahashi, Hidenori & Lim, Eunah, 2022. "Experienced ‘misfits’: Multinationality alignment, international experience, and adjustments to multinationality," Journal of Business Research, Elsevier, vol. 151(C), pages 56-69.
    • Handle: RePEc:eee:jbrese:v:151:y:2022:i:c:p:56-69
    DOI: 10.1016/j.jbusres.2022.06.058
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