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A three-stage theory of international expansion: the link between multinationality and performance in the service sector

Author

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  • Farok J Contractor

    (School of Management, RutgersUniversity, USA)

  • Sumit K Kundu

    (Boeing Institute of InternationalBusiness, John Cook School of Business, Saint Louis University, USA)

  • Chin-Chun Hsu

    ([1] 2Boeing Institute of InternationalBusiness, John Cook School of Business, Saint Louis University, USA [2] 3The Overseas Chinese Institute ofTechnology, Taiwan, ROC)

Abstract

It is generally assumed that the performance of a firm improves with greatermultinationality. Yet recent empirical studies have shown both a U-shapedrelationship (which suggests an initially negative effect of international expansionon performance, before the positive returns of international expansion arerealized) and an inverted-U-shaped relationship (which suggests thatinternational expansion beyond an optimal level is again detrimental toperformance, and results in a negative slope). This paper proposes a new unifiedthree-stage theory of international expansion that incorporates both concepts in asigmoid hypothesis. It then tests this on data from 11 service industries,highlighting the difference between knowledge-based and capital-intensiveservice sectors. Journal of International Business Studies (2003) 34,5–18. doi:10.1057/palgrave.jibs.8400003

Suggested Citation

  • 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;Academy of International Business, vol. 34(1), pages 5-18, January.
    • Handle: RePEc:pal:jintbs:v:34:y:2003:i:1:p:5-18
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