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Firm performance and international diversification: The internal and external competitive advantages

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  • Bobillo, Alfredo M.
  • López-Iturriaga, Felix
  • Tejerina-Gaite, Fernando

Abstract

This paper examines (a) the relation between the institutional framework of a firm's home country and the firm's development of its internal and external competitive advantages, and (b) whether--and if so, how--a firm's preference for, or dependency on, either internal or external capabilities affects the relation between international diversification and firm performance. Based on a sample of more than 1,500 manufacturing firms in Germany, France, the United Kingdom, Spain, and Denmark, the results show that countries' institutional factors (i.e., capital markets, financial intermediaries, and skilled workforce) significantly impact both internal and external competitive advantages of the firms. The paper also sheds light on how the mix of internal and external competitive advantages affects the relation between international diversification and firm performance. Accordingly, the results support an S-shaped relation structured in three different phases, irrespective of the firms' orientation toward internal or external capabilities.

Suggested Citation

  • Bobillo, Alfredo M. & López-Iturriaga, Felix & Tejerina-Gaite, Fernando, 2010. "Firm performance and international diversification: The internal and external competitive advantages," International Business Review, Elsevier, vol. 19(6), pages 607-618, December.
  • Handle: RePEc:eee:iburev:v:19:y:2010:i:6:p:607-618
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    Cited by:

    1. Jerzy Cieślik & Eugene Kaciak & Dianne Welsh, 2012. "The impact of geographic diversification on export performance of small and medium-sized enterprises (SMEs)," Journal of International Entrepreneurship, Springer, vol. 10(1), pages 70-93, March.
    2. Swoboda, Bernhard & Olejnik, Edith & Morschett, Dirk, 2011. "Changes in foreign operation modes: Stimuli for increases versus reductions," International Business Review, Elsevier, vol. 20(5), pages 578-590, October.
    3. Jiménez, Alfredo & Delgado-García, Juan Bautista, 2012. "Proactive management of political risk and corporate performance: The case of Spanish multinational enterprises," International Business Review, Elsevier, vol. 21(6), pages 1029-1040.
    4. Marcus Dittfeld, 2017. "Multinationality and Performance: A Context-Specific Analysis for German Firms," Management International Review, Springer, vol. 57(1), pages 1-35, February.
    5. repec:sdo:regaec:v:26:y:2017:i:1_5 is not listed on IDEAS
    6. Lin, Wen-Ting & Liu, Yunshi, 2012. "Successor characteristics, organisational slack, and change in the degree of firm internationalisation," International Business Review, Elsevier, vol. 21(1), pages 89-101.
    7. Fan, Di & Zhu, Cherrie Jiuhua & Nyland, Chris, 2012. "Factors affecting global integration of Chinese multinationals in Australia: A qualitative analysis," International Business Review, Elsevier, vol. 21(1), pages 13-26.
    8. de Jong, Gjalt & van Houten, Jerry, 2014. "The impact of MNE cultural diversity on the internationalization-performance relationship," International Business Review, Elsevier, vol. 23(1), pages 313-326.
    9. Jouida, Sameh & Bouzgarrou, Houssam & Hellara, Slaheddine, 2017. "The effects of activity and geographic diversification on performance: Evidence from French financial institutions," Research in International Business and Finance, Elsevier, vol. 39(PB), pages 920-939.
    10. de Jong, Gjalt & Phan, T. Binh & van Ees, Hans, 2011. "Does the meta-environment determine firm performance? Theory and evidence from European multinational enterprises," International Business Review, Elsevier, vol. 20(4), pages 454-465, August.
    11. repec:eee:advacc:v:31:y:2015:i:2:p:228-238 is not listed on IDEAS

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