Economies of Scale: The Rationale behind the Multinationality-Performance Enigma

Research output: Contribution to journalResearch articleContributedpeer-review

Abstract

In a widely acclaimed contribution to Management International Review, Hennart (2007) challenged one of the mainstream theories of International Business, the S-curve relationship between multinationality and performance, by arguing that there is no positive impact on performance aside from the scale enhancing effect resulting from increasing multinationality. We examine his arguments by analyzing 3876 firms from Canada, Germany, Japan, the UK and the US over the period from 2002 to 2016. We find that the empirical evidence for a direct positive impact of multinationality on performance is not convincing. However, increasing multinationality leads to a significantly higher firm performance via the economies of scale-channel. Multinationality seems to be more important as a means to increase scale for firms from small home markets compared to firms from large domestic markets. Intangible assets appear to amplify the impact of scale on performance much more than the impact of multinationality on performance. In the end, it's size that matters.

Details

Original languageEnglish
Pages (from-to)681-710
Number of pages30
JournalManagement International Review
Volume62
Issue number5
Publication statusPublished - 4 Aug 2022
Peer-reviewedYes

External IDs

unpaywall 10.1007/s11575-022-00473-2
Scopus 85135304464
Mendeley 6120b9f8-a477-34a5-906a-9fa735caa31e
ORCID /0000-0002-8380-5319/work/142235810
ORCID /0000-0001-5423-0109/work/142237569

Keywords

Research priority areas of TU Dresden

Keywords

  • Economies of scale, Intangible assets, Multinationality, Performance