The Roles of Industry Idiosyncrasy, Cost Efficiency, and Risk in Internationalization: Evidence from the Insurance Industry

A central matter of dispute in the internationalization literature is the existence and shape of a systematic relationship between the degree of internationalization and firm performance (I-P relationship). Considering the global insurance industry, we show that the I-P relationship depends on the industry’s idiosyncrasies and on the geographical scope of internationalization. The life insurance industry’s idiosyncrasies lead to relatively high liability of foreignness that compromise cost efficiency, and relatively low risk reduction benefits of globalization. Therefore, we observe an overall negative impact of globalization on life insurers’ performance. However, the nonlife insurance industry’s idiosyncrasies render this relationship insignificant.