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How Firm Performance Affects Internationalization

Author

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  • Jae C. Jung

    (University of Missouri-Kansas City)

  • Pratima Bansal

    (The University of Western Ontario)

Abstract

Only a few studies have investigated whether a firm’s performance has an effect on its internationalization. These studies, focusing on actual firm performance, have suggested a resource-based argument and generally found non-significant results. In this paper, we argue that relative firm performance is critical in determining a firm’s internationalization because it influences a firm’s attitude toward risk-taking. We apply prospect theory to predict this relationship. Using time-series, cross-sectional analysis of 701 Japanese firms from 1993 to 1998, we uncovered an inverted-U shaped relationship between a firm’s relative performance and its degree of internationalization using its historical performance target. As compared to the industry target, relative performance showed a positive impact on a firm’s internationalization.

Suggested Citation

  • Jae C. Jung & Pratima Bansal, 2009. "How Firm Performance Affects Internationalization," Management International Review, Springer, vol. 49(6), pages 709-732, December.
    • Handle: RePEc:spr:manint:v:49:y:2009:i:6:d:10.1007_s11575-009-0014-7
    DOI: 10.1007/s11575-009-0014-7
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