Eco No Metric Journal

8/3/2019 Eco No Metric Journal

1/15

Effects of Firm Resources on Growth in MultinationalityAuthor(s): Chiung-Hui Tseng, Patriya Tansuhaj, William Hallagan, James McCulloughReviewed work(s):Source: Journal of International Business Studies, Vol. 38, No. 6 (Nov., 2007), pp. 961-974Published by: Palgrave Macmillan JournalsStable URL: http://www.jstor.org/stable/4540469 .

Accessed: 29/10/2011 04:04

Your use of the JSTOR archive indicates your acceptance of the Terms & Conditions of Use, available at .http://www.jstor.org/page/info/about/policies/terms.jsp

JSTOR is a not-for-profit service that helps scholars, researchers, and students discover, use, and build upon a wide range of

content in a trusted digital archive. We use information technology and tools to increase productivity and facilitate new forms

of scholarship. For more information about JSTOR, please contact [email protected].

Palgrave Macmillan Journals is collaborating with JSTOR to digitize, preserve and extend access toJournal of

International Business Studies.

http://www.jstor.org
http://www.jstor.org/action/showPublisher?publisherCode=palhttp://www.jstor.org/stable/4540469?origin=JSTOR-pdfhttp://www.jstor.org/page/info/about/policies/terms.jsphttp://www.jstor.org/page/info/about/policies/terms.jsphttp://www.jstor.org/stable/4540469?origin=JSTOR-pdfhttp://www.jstor.org/action/showPublisher?publisherCode=pal


2/15

journalfInternationalusinesstudies2007)8,961-974C2007Academy f InternationalusinessAllrights eserved047-2506$30.00www.jibs.net

E f f e c t s o f f i r m resources o n g r o w t h i nmultinationality

Chiung-HuiTseng',PatriyaTansuhaj2,WilliamHallagan3 ndJamesMcCullough4'Institute f Internationalusiness,NationalChengKungUniversity,ainan,Taiwan,R.O.C.;2lInternationalusinessnstitute,WashingtonStateUniversity,ullman,Washington,USA;3School f Economicciences,WashingtontateUniversity,ullman,Washington, SA; Schoolof Business nd Leadership, niversityf PugetSound,Tacoma,Washington, SACorrespondence:Chiung-Huiseng, nstitute f InternationalBusiness,NationalChengKungUniversity,1, Ta-Hsueh oad,Tainan 01,Taiwan,R.O.C.Tel:+ 886 6 275 7575 ext.53512;Fax:+886 6 2766459;E-mail:[email protected]

AbstractMultinationalityefers to the extent to which firms'business activitiesspanacross nationalborders.Moving beyond prioremphasison the consequencesfmultinational xpansion,thisstudysheds lighton the antecedents y analyzinghow firm resourcesinfluence changes in multinationality.Buildingon theresource-basedview of the firm, we propose a framework hat consists ofresourcedeterminants n two categories:knowledge-basedandproperty-basedresources. Empiricalresults obtained from a sample of publicly held USmanufacturingcompanies show that knowledge-based resourcesgeneratefaster and longer-lasting nfluenceson internationalgrowth than property-based resources.Specifically, esourcesrelated o technologicaland marketingknowledge, and property-based esourcesrelated to organizational lackandinternallygenerated profits,are found to be significantdriving orces behindgrowth in multinationality. hisstudy not only advancesour understanding fthe antecedents of multinational xpansion,but also provides mplications ndavenuesfor futureresearch.Journal f International usiness tudies 2007) 38, 961 974.doi:0. I057/palgrave.jibs.8400305Keywords:multinationality;nternationalrowth; esource-basediewIntroductionThe extent to which business activities span across nationalboundaries, namely multinationality,s a critical decision confront-ing firms during the current era of globalization. Since Vernon(1971) brought this issue to our attention, interest in multi-nationality has generated a large volume of studies (e.g., Grant,1987; Daniels and Bracker,1989; Tallman and Li, 1996; Hitt et al.,1997; Gomes and Ramaswamy,1999; Geringer et al., 2000; Caparand Kotabe, 2003; Contractor et al., 2003; Lu and Beamish, 2004).Centered on the ongoing debate of whether benefits from foreignoperations outweigh costs, previous studies have paid much heedto the consequences f operating abroad, notably the multination-ality - profitability linkage. Such research has largely overlookedthe antecedentsdriving multinational expansion.Given the strategic importance of overseas expansion to firmgrowth (Hitt et al., 1997; Autio et al., 2000; Tan and Mahoney,2005), this lack of theoretical and empirical attention to thepreconditions of multinationality seems particularly surprising.Managers at a firm aiming to expand through the internationaltrajectory, for instance, would be bound to first find out 'whatdetermines how much further their firm can proceed internation-

Received: 9 May2002Revised: 24 March 006Accepted: November 006Onlinepublication ate: 19July2007


3/15

Firmresources and multinationality growth Chiung-Huiseng t al962

ally' and 'why rivals show different pace of multi-national expansion'. To address these intriguingbut unanswered questions, we extend priorworkbylooking backwards at the antecedents affectingchanges in multinationality. Drawing upon theresource-based view (RBV),we argue that resourceavailability plays a pivotal role in determining afirm's international growth.The RBV logic is insightful and pertinent inanswering our queries for two main reasons. First,foreign expansion demands more resources tobuffer costs and risks incurred overseas due togreater managerial complexity and liability offoreignness. Firms, however, face resource con-straints; more important, the seriousness of thislimitation hinges on the type of resources to bedeployed abroad. Thus it is relevant to assess whatresources are more useful in launching foreignbusiness activities. Second, the RBV conceives afirm as a collection of resources (Penrose, 1959;Wernerfelt,1984), and highlights the impact of thefirm's resource heterogeneity, rather than theexternal environment, on its competitive position(Barney, 1991). Accordingly, the fact that somefirms are superior to others in the marketplace isascribable to their possession of unique resources(Peteraf, 1993). Along this line of thinking, webelieve that variations in international involve-ment among firms emanate from differences inresource availability.On the following pages, we first use the RBVasthe theoretical foundation to develop hypothesesthat relate the resource-based determinants togrowth in multinationality. Next, we describe theresearch methods, followed by our empiricalresults. Finally, we draw implications and suggestdirections for future research.Theoretical background and hypothesesThe thinking of the RBV owes its origins to earlyeconomic models of Chamberlin (1933) and Kaldor(1934), who first acknowledged the importance oforganization-specific resources to firm success, aconcept that was later developed more thoroughlyby Penrose (1959) and Demsetz (1973). Not untilthe mid-1980s did the theory gain its popularity inthe strategy literature as, among others, Wernerfelt(1984) and Barney (1991) have made significantcontributions to its development (see Foss (1997)for a detailed account of the evolution of thetheory). In essence, the RBV regards resources andcompetitive advantages as factors specific to a firm,rather than general to the industrial environment

in which the firm operates, which challenges themarket-based view that had long been held bymany economists.More specifically, the RBVpresumes that firmswithin an industry are heterogeneous in the valu-able resources they control, and such firm hetero-geneity persists over time insofar as those resourcesarenot perfectlymobile across firms (Barney,1991).Strategiesaretherefore assertedto be based more onfirm-specific attributes than on general marketstructures,and are devised by the firm to identify,protect, and exploit its unique skills and proprie-tary assets (Tallman,1991). Consequently, the firmdirects its strategy crafting based on resources thatit has amassed (Barney,1996; Oliver, 1997). Mean-while, the firm also chooses a strategy that canbetter utilize the pool of resources(Madhok, 1997).The two fundamental tenets underlying the RBV- that is, firm heterogeneity and resource immobi-lity - are just as germane to an internationalcontext as they are to the domestic milieu (e.g.,Ekeledo and Sivakumar,2004; Knightand Cavusgil,2004; Tan and Mahoney, 2005). Laying thesepresuppositions on the case of multinationalexpansion, firms within a single industry exhibit adifferent level of international growth, thanksmainly to inherent idiosyncrasy in the resourcesthey own. Further, the resources, which may betransferable across nations within the boundary ofa firm, are not perfectly mobile across firms.Indeed, for a multinational firm contemplating anexpansion strategy across national boundaries, itsexisting inventory of resourcesinevitably will limitthe range of strategic possibilities. As the internalconditions of firms are emphasized, the RBVhastaken into account constraints on organizationalgrowth (Ramanujamand Varadarajan,1989),which in turn offers valuable insights into the rateof international xpansion.Synthesizing prior notions (Wernerfelt,1984;Barney, 1991; Amit and Schoemaker, 1993),resources n this paper refer to the input factorsthat, if employed properly, impose positive impactson firms' strategies and business objectives. Giventhat resources embedded in organizations canrange widely, in order to classify various firmresources into categories and systematically exam-ine their influences we follow a typology developedby Miller and Shamsie (1996), which dividesresources into two kinds: knowledge-basedesourcesrelate to particular know-how and skills, andproperty-basedesources elate to specific and well-defined assets. Accordingly, we define knowledge-

journal f International usinessStudies


4/15

Firmresources and multinationality growth Chiung-Huiseng t al 963

basedresources s collective oodswithin the firm thatcan be shared by multiple agents without dimin-ishing their value or the amount available forothers. For instance, a patent or reputable brandname can be employed by more than one foreignagent or subsidiarywithout necessarily hamperingits use by others. In comparison, property-basedresources re described as privategoods in the sensethat their use by one party will, on a one-to-onebasis, reduce the possibility of being used by others.Private-good resources, unlike collective-goodresources, cannot be recycled for repeated con-sumption. For example, an overseas expansionusing financial resources will reduce the financialresources remaining for other expansion activities.Collective-good resources are intangible and invi-sible, such as 'goodwill' or 'trade secrets', whereasprivate-good resources have more easily measuredvalues such as 'retained earnings' or 'inventory'.Adhering to this conceptualization, we drawupon the RBVliterature to identify two types ofknowledge-based resources (collective goods) -technologicaland marketingresources which havebeen shown to have pronounced effects on firms'operations and decisions (Kim and Hwang, 1992;Erramilliet al., 1997; Kotabe et al., 2002; Song et al.,2005), and three types of property-basedresources(private goods): slack as well as internallygeneratedand externally aised inancialresources,which repre-sent primaryfinancial sources for various corporateactivities (Bourgeois,1981; Greenley and Oktemgil,1998; Tanand Peng, 2003). Below,we develop a setof hypotheses that link these resourcesto growth inmultinationality.Knowledge-based esources(collectivegoods)TechnologicalresourcesTechnological resources refer to the assets used todevelop new products or formulate innovativemanufacturing processes (Moormanand Slotegraaf,1999; Silverman, 1999). Unlike physical or financialassets, technological resources have a collective-good characteristic, and can be replicated andshared among several sites without incurringthe full costs of re-creating them in everytransfer (Caves, 1971, 1996; Martin and Salomon,2003). Such strength, as a result, motivates firmsto increase their international presence in orderto make better use of the resources in moreforeign locations (Buckley and Casson, 1976).Some evidence consistent with this insight hasbeen documented in the literature. For instance,

entrepreneurial studies have observed that high-technology companies are more likely than low-technology companies to engage in multinationaloperations (Jones, 1999; Crick and Jones, 2000).Much of the research on born-global firms has alsobeen connected with high-technology sectors(Autio et al., 2000; Burgel and Murray, 2000).Besides, studies of foreign direct investment havefound that R&Dintensity, a widely used surrogatefor technological resources,plays a substantial rolein shaping firms' expansion behaviors acrossnational borders (Davidson and McFetridge, 1985;Gatignon and Anderson, 1988; Chen and Hennart,2002).In addition, there are three more reasons whytechnological resources tend to boost internationalgrowth. First,some foreign countries offer stronglyattractive locations, such that technologies devel-oped in the home country may be better exploitedthere. To optimize technology exploitation, firmsneed to go beyond domestic markets and continueto look for markets where their proprietaryknow-how can be best created and utilized. This is to gainso-called 'location-specific advantage' (Dunning,1981). Second, and related to the first, firms mayfind it beneficial to combine their technologicalresources with specific factors or market conditionsin host countries (e.g., labor availability, produc-tion facilities, distribution channels, and so forth;Chen, 2005). To take preemptive advantage of suchcombinations, and lock other firms out of suchadvantage, technology-intensive firms have toexpand overseas in an accelerated manner. Third,in general, firms with greater technological inten-sity put more effort into cultivating new ideas andinnovating products. To attain necessary salesvolumes before the innovations become obsoleteor imitated by others, a process of rapid internatio-nalization to access a wider market base may beessential. In the export literature, for instance, ithas been found that high-tech firms have a greaterinvolvement in exporting activities (e.g., Cavusgiland Nevin, 1981; Diamantopoulos and Inglis, 1988;Genttirk and Kotabe, 2001). Thus:

Hypothesis 1: There is a positive relationshipbetween levels of technological resources andgrowth in multinationality.Marketing resourcesMarketing resources are the assets used to differ-entiate products from competitors and build posi-tive brand images (Erramilli et al., 1997; Kotabe

Journalof International Business Studies


5/15

Firmresources and multinationality growth Chiung-Huisengeta964

et al., 2002). Through steering the resources intothe development of marketing programs (market-ing mix) and marketing management practices (theprocess implemented to manage marketing pro-grams), firms can render products distinctive andraise brand recognition. As the worldwide market-place is increasingly homogenized, firms are betterable to offer common marketing programs andpractices on a global basis (Chung, 2003). Thissuggests that firms can draw upon the experienceand expertise of operating in their source countryand/or other foreign countries, and make the set ofmarketing resources available to foreign locationsat relatively low costs (Dunning and McQueen,1981). Accordingly, to achieve global marketingefficiency, the possession of marketing resourceswill drive firms to expand into more foreignmarkets. The standardization of marketing prac-tices also enables firms to provide more consistentofferings to their customers, and more uniformmarketing planning and control proceduresto theiroverseas operations (Chung, 2003). Such applica-tion of marketing resources to a global setting hasgreat potential to increase the strength of brandimages, facilitate achievement of scale economiesin marketing, and enhance bargaining power withdistributors and consumers (Levitt, 1983; Plotkin,1993). Coupled with the growth of global commu-nication network lately, the favorablereputation ofa brandmay spill over to foreign marketseven morerapidly, hence encouraging the brand owner toexpand overseas.Nonetheless, there are some obstacles to theworldwide deployment of marketing resourcesthatmay limit the degree to which a firm can expandabroad. Although the world economy has becomeincreasingly integrated, cross-country or cross-cul-tural differences still remain. International market-ing researchers have observed that nationaldistinctions, such as consumer preferences,market-ing environments, and infrastructures, can beharmful to the application of existing marketingskills in foreign lands, and will slow down a firm'space of entering a new market (Whitelock andPimblett, 1997). Likewise, international businessscholars have also suggested that replicating firms'know-how in different environmental settings cansometimes be difficult, owing to differencesbetween home and host contexts, labeled as'location-specific disadvantage' (Erramilli et al.,1997; Madhok, 1997). This location disadvantagewill especially limit the successful internationalapplication of marketing resources, which,

compared with the international deployment oftechnologies, is more sensitive and confined tolocal institutional factors, such as consumer tastesor channel networks, and thus tempers the velocityof multinational expansion. In addition, a highlydifferentiated product or remarkably strong brandname is often closely aligned with the nationalidentity of a firm's home country, which does notalways contribute positively to the product image.When entering a foreign market that maintains ahostile relationship with a firm's home country, thefirm with such brand 'strength' will need toexercise additional care in the local market andface possible consumer boycotts or distastes. In thiscase, undue marketingresourceswill be detrimentalto foreign expansion.Takentogether, greatermarketing resourcespushfirms to set foot in the international arena forpursuit of marketing efficiency, but excessive use ofmarketing resources overseas is vulnerable to bothlocation disadvantage and unfavorable consumerresponse that, in turn, undermine expansionactivities. Accordingly, we reason that there is anoptimal level of marketing resources for firms'international growth. Therefore we expect:

Hypothesis 2: An inverted U-shaped relationshipexists between levels of marketing resources andgrowth in multinationality.

Property-based resources (private goods)OrganizationalslackIntroduced by Cyert and March (1963) in ABehavioral Theory of the Firm, the concept oforganizational slack and its use in theories haveevolved in two quite different dimensions. Slackcan be treated either as surplus that promotessuccess or as evidence of inefficiency. Amongvarious positive definitions for the term, Bour-geois's (1981) treatment, adapted from Cyert andMarch (1963), is probably the most often cited inthe literature:

cushion of actual or potential resources which allow anorganization to adapt successfullyto internal pressuresforadjustmentor to external pressures or change in policy, aswell as to initiate changes in strategywith respect to theexternal environment. (p 30)In this definition, organizational slack serves as abuffer that allows the firm to adjust to dramaticshifts or discontinuities in the environment withminimal trauma, and also as a catalyst that enablesthe firm to initiate new strategic postures in



6/15

Firm resources and multinationality growth Chiung-Huiseng t al 965

response to environmental changes. Such capacityto both shield the firm's core from changes andstimulate the firm to change in reaction to externalinfluences is particularly important for multina-tional expansion.As the business community becomes more glob-ally integrated, it is common for some parts of avalue chain to be dispersed in different placeswhere they can be performed most efficiently orwhere they can create the greatest value. Suchgeographical relocation of value-chain activitiesusually forces the firm to make a correspondinginternational move with its suppliers or customersin order to survive in the industry. Since movingoverseas requiresand consumes resources,by view-ing organizational slack as extra resources availableto an organization it stands to reason that slackallows the firm to interact or compete in interna-tional markets with less binding constraints. Inaddition to this reactiveresponse to the pressureforexpanding internationally, organizational slackalso plays a proactive role in promoting interna-tional growth. As slack is generated, the firm canliterally afford to experiment with new strategiesby, for example, entering a new market (Bourgeois,1981). Slack makes possible the exploration orexploitation of foreign opportunities, and fostersthe pursuit of goals outside the realm of those

dictated by domestic optimization principles(Bourgeois, 1981; Greenley and Oktemgil, 1998).Although organizational slack may offer theforegoing purported benefits, excessively highlevels of slack can reflect inefficiency of the firm.In this respect, slack is a pool of resources thatexceeds the minimum necessary for normal opera-tion, and has not yet been optimally deployed(Nohria and Gulati, 1996). Cyert and March (1963)indicated that in standard neoclassical economics,which equates equilibrium with efficiency, slackappears only when the firm is not in equilibrium.Sharfman et al. (1988) further suggested that thereis an optimal level of slack for any given firm. If afirm possesses slack beyond that level, the excessslack will be associated with low firm performance(Sharfman, 1985). Insofar as its role as a buffer isconcerned, organizational slack may also have anegative impact on firms. Instead of providingmanagers with the leeway to pursue new strategicopportunities, slack may actually weaken or slowthe firm's adaptive response to sudden environ-mental shifts (Cheng and Kesner, 1997). Whenslack is high, the firm can afford to be lessresponsive to environmental volatility, thus dulling

its motive for strategic adjustments. In the case ofmultinational expansion, firms with slack as acushion can become less sensitive to foreigndemands or changes in world market conditions,and show little zealousness in pursuing newinternational business opportunities.While arguments can be made for either thepositive or the negative effect of organizationalslackin the international setting, these need not becompeting hypotheses. We suggest that too littleslack may be insufficient to support a repertoire ofpotential solutions to the challenges arising fromincreasing global competition; too much slack canlead to waste and organizational indiscipline, andconsequently become a deterrent for a firm facedwith overseas opportunities. This is to say that anincreased level of slack contributes to firms' inter-national growth up to a certain optimal level,beyond which greater slack decelerates firms'growth in multinational expansion. Accordingly,the hypothesized relationship between organiza-tional slack and growth in multinationality iscurvilinear, in the form of an inverse U-shape.

Hypothesis 3: An inverted U-shaped relationshipexists between levels of organizational slack andgrowth in multinationality.Internally eneratedand externally aisedfinancialresourcesFinancial resources are essential to multinationalexpansion (Doukas and Lang, 2003). Theoretically,affluent financial resources give firms a greaterdegree of freedom to contemplate wide-rangingforeign expansion possibilities without necessarilycompromising among opportunities, and make theexpansion process much smoother and less proble-matic (Ito and Rose, 2002; Mishina et al., 2004).Thus failing to maintain a sufficient level offinancial resources may limit a firm's internationalpresence, which in turn leads to a lag behind rivalsin the race of pursuing global leadership. However,financial resources possessed by a firm derive fromvarious sources, which relate to disparate costconcerns and required-to-meet obligations fordeploying the resources. As a result, the firm isrequired to synchronize its pace of global expan-sion with the expectations of different resourceproviders, which suggests that sources of financialresources will influence the internationalizationbehavior of a firm.

Broadly speaking, financial resources can beyielded inside or outside organizations, of which

Journal f International usinessStudies


7/15

* Firmresources and multinationality growth Chiung-Huiseng tal966

the resources generated internally are constitutedchiefly by the profits from a firm's present invest-ments, whereas those raisedexternally are obtainedthrough capital markets or financial institutions,and can be used for future investments. Normally,internal funding is more unfettered in usage owingto fewer cost concerns, and can be instantlyploughed back into the firm to optimize ongoingforeign operations, continue local expansion, andthen strengthen the firm'sposition in host markets.Besides, as a constant and more predictable sourceof finance, internal profits serve as the mainstay ormomentum for achieving long-term corporateobjectives, of which continuous internationalgrowth is usually of prime importance for manyfirms under the trend of globalization. Moreover,possession of internal resources tends to conferupon a firm greater prowess to plan ahead andproceed along the scheduled trajectory of interna-tional development with fewer untoward interrup-tions, lending the firm more confidence inaccelerating its entry into new foreign markets.In comparison, external funding, no matterwhether raised in the form of equity or of debt,entails considerable costs of capital deployment,and is usually resorted to when firms cannotfinance business activities themselves. In a simplis-tic sense, which does not take into account the caseof special government loans, the costs of raisingcapital externally embrace dividend payout onequity and interest payment on debt. In particular,firms using debt financing are required to repay aspecific portion of the loan amount on a regularbasis, irrespective of how much profit they aremaking. Such pressuresto meet the debt obligationand to remain lucrative frequently force firms torelinquish risky strikes in foreign markets, andprohibit them from making bold movements intointernational landscapes. Furthermore,managerialactions are often disciplined and monitored bycreditors and shareholders (Jensen, 1986). Asmultinational operations are thought to be repletewith more uncertainties and risks than domesticones, and firms face liability of foreignness vis-di-vislocal companies, it is not uncommon for externalfund providers to be reluctant to finance expansioninto distant and unknown overseas markets, whichmay cause instability in firms' future earnings. Suchfund providers may even request firms to withdrawfrom unprofitable overseas operations to ensuretheir ability to repay loans. With high financialleverages, firms will accordingly engage in globaloperations with more caution and possible delays,

Knowledge-BasedResourcesTechnologicalesources

Inverted-UMarketingesources

Property-Based ResourcesI n v e r t e d - UOrganizational slack Growth in

m u l t i n a t i o n a l i t yInternallygenerated +financial resources

Externallyraised financialresources

Control Variables- Firm size- Firmage- Industryegment

Figure 1 Firmresources and growth in multinationality.which are likely to lead to a decelerating progressofinternationalization.In sum, internally generated and externally raisedfinancial resourceshave discernibleeffects on firms'international growth. Hence:

Hypothesis 4: There is a positive relationshipbetween levels of internally generated financialresourcesand growth in multinationality.Hypothesis 5: There is a negative relationshipbetween levels of externally raised financialresourcesand growth in multinationality.

Figure 1 summarizes the hypotheses. Within theknowledge-based category, levels of technologicalresources are positively related to growth in multi-nationality, while levels of marketing resourceshave a non-linear and inverted U-shaped relation-ship with growth in multinationality. In terms ofthe impact of the property-basedgroup, an invertedU-shaped influence is suggested for organizationalslack, a positive effect for internally generatedprofits, and a negative impact for externally raisedcapital.MethodsThe sampleThe above conceptual framework is tested on asample that comprises US public firms in manu-facturing sectors ranging from StandardIndustrial

journal of International Business Studies


8/15

Firmresources and multinationality growth Chiung-Huiseng tal 967

Classification (SIC) 3000 to 3999. This samplingframe is selected for two reasons. First,using onlyUS firms ensures that multinational expansionwould not be subject to variations in national lawsand regulations in different home countries(Shraderet al., 2000). Second, SIC 3000-3999 hasbeen employed as the sample by prior studies (e.g.,Reuerand Leiblein,2000) becausea large proportionof firms operating within this SIC range are majorplayers in the international business community.Using this SIC spectrum, we compiled a list offirms from the 2001 edition of Directory f CorporateAffiliations and cross-verified the list with theCOMPUSTAT atabase where the data of interestwere obtained. These procedures generated a sam-ple of 814 USpublic manufacturers. Note that firmswith no international business involvementbetween 1995 and 2000 were not ruled out. Lackof multinational expansion reflects the probabilityof insufficient firm resources, which may in turnconstrain international participation. Besides,firmsthat were founded during or after this examinedperiod were dropped from the sample automati-cally since they do not carry complete data for allvariables.To probe firms' changes in overseas expansionover time, we selected a time span between 1995and 2000. This period was chosen because itrepresents a duration when the global businessclimate was relatively expansive (UNCTAD,2001;WorldTradeOrganization, 2001), which provides asuperb template for analyzing the differencesamong firms in responding to foreign opportu-nities. Because of the longitudinal nature of thisstudy, all variables are required to have completedata throughout the examined period. After dele-tion of cases with missing values and a few extremedata points with values beyond four standarddeviations from the mean, the final samples consistof 286, 257, 243, and 242 manufacturing firms,which are used for no lag, 1-year ag, 2-year lag, and3-year lag regression models, respectively. Themainspring for the lag conduct is that the causallinks between the dependent variable and indepen-dent variables can be better indicated by lagrelationships (Grant, 1987; Grant et al., 1988).Because the four sets of firms in the final samplesexclude a considerable number of firms from theinitial sampling frame, it is necessary to evaluatewhether firms in the final samples are homoge-neous with those excluded as far as their disposi-tion toward international operations is concerned.The distribution of multinationality for included

firms was assessed against the distribution for firmsexcluded using two-independent-sample tests. Nosignificant difference between the two distributionsis evident at the 0.05 level, indicating that the finalsamples are representative of the total population.The dependent variableConsistent with the majority of prior studies, theconcept of multinationality is operationalized asthe percentage of foreign sales (e.g., Grant, 1987;Habib and Victor, 1991; Tallman and Li, 1996;Capar and Kotabe, 2003). In turn, the growth inmultinationality is the change in percentage offoreign sales between 1995 and 2000. Although afew scholars, such as Sullivan (1994), have sug-gested the use of a multi-item scale, it has beenarguedthat aggregatinga set of indicators in whicheach could potentially result in different effects isquestionable and, instead, a good single estimatormay be more justifiable (Ramaswamyet al., 1996).In effect, besides the foreign sales ratio, we alsonoticed other indicators frequently employed inprevious research, including the percentage offoreign assets (e.g., Daniels and Bracker,1989), thenumber of foreign subsidiaries (e.g., Stopford andWells, 1972), and the number of countries wherethe firm operates (e.g., Reuer and Leiblein, 2000).Nevertheless, the COMPUSTAT atabase does notinclude complete information on these measuresfor most of our sample firms. Limited by both dataavailability and comparison necessity, we adoptforeign sales as a percentage of total sales in thisstudy.IndependentvariablesFollowing Grant (1987) and his colleagues' sugges-tion (Grantet al., 1988), the independent variablesin this study are lagged in addition to the no-lagestimation to better manifest causality. Lag effectsare analyzed by 1 year, 2 years, and 3 years. Morespecifically, the independent variables are calcu-lated as firms' averageresource conditions betweenthe periods 1995-2000, 1994-1999, 1993-1998,and 1992-1997. As to their measurement, technolo-gical and marketing resources are gauged by conven-tional measures, the ratio of R&D expenses to totalsales (Davidson and McFetridge, 1985; Gatignonand Anderson, 1988; Erramilli et al., 1997), and theratio of marketing-related expenses to total sales(Gatignon and Anderson, 1988; Vachani, 1995;Erramilli et al., 1997), respectively.As slack can be stored in an organization bydifferent forms, prior studies have broadly classified

journal of International Business Studies


9/15

Firm resources and multinationality growth Chiung-Huiseng ta968

it into two categories: available (unabsorbed) andunavailable (absorbed)slack (Sharfmanet al., 1988;Mone et al., 1998; Tan and Peng, 2003). Their maindifference lies in whether the slack resources arealready committed within the organization. Basi-cally, available slack corresponds to the uncom-mitted resource(s)readily available to support newinitiatives. This type of slack featuresa capacity thatcan be easily redeployed elsewhere and thus allowsfor greater managerial discretion. In contrast,unavailable slack amounts to the excess costsincurred in a firm. Because this slack has beenabsorbedinto the cost structure of the firm, it is notavailable for discretionary use and is difficult toredeploy. Herein, we focus on available slack,provided that such resource is more readily andinstantly employable for managers to buttressforeign business activities. Guided by the studiesof Bourgeois (1981) and Tan and Peng (2003), wemeasure organizationalslack by retained earnings,that is, the excess earnings left in a firm, which areindicative of the uncommitted nature of theresources.The variable of internally generated financialresourcess appraised by the return on investment,which denotes the internal profits generated frompresent investment. The variableof externally aisedfinancial resources s assessed by the ratio of cashflow to invested capital. The data for cash flow areextracted from COMPUSTAT nder the item offinancing activities, which calculates cash receivedfrom or paid to financing-related transactions, suchas cash dividends, issuance or reduction of long-term debt, addition of equity stock, and so on.Control variablesThree variables that are likely to affect the growthin multinationality are controlled. They are firmsize, firm age, and industry segment in which firmsparticipate. Firm size is measured by employeecount (Geringer et al., 2000), in the logarithmicform in order to remedy the significant positiveskew, which is evident for the pre-transformedcount measure (Tabachnick and Fidell, 2001).Similar to the independent variables, the averagenumbers of employees for the four periods 1995-2000, 1994-1999, 1993-1998, and 1992-1997 arecalculated. Firm age is calculated by firms' existenceperiod from founded year to 2000, 1999, 1998, and1997 (Autio et al., 2000; Guthrie, 2001). Likewise, alogarithmic form is also taken owing to the positiveskew of firm age. Industry effects are controlled forby using nine dummy variables, representing 10

industrial subsectors (I1=SIC30, I2=SIC31, I3=SIC32, I4=SIC 33, Is-=SIC34, I6=SIC 35, I7=SIC 36,I8=SIC 37, I9=SIC 38). The sector SIC 39 is theresidual dummy variable that signifies when allI's=0.ResultsTable 1 presents the means, standard deviations,and correlations among variables in the analyses.The correlation between marketing resources andits squared term and the correlation betweenorganizational slack and its squared term arenotably high. To further examine the severity ofmulticollinearity, variance inflation factors (VIFs)arereported.As shown in the second parentheses ofTable 2, the VIFs for all model variables are withinacceptable tolerance, indicating that the correlatedindependent variables do not have undue influ-ences on the regression estimates. Normal prob-ability plots, residual plots, and the Kolmogrov-Smirnov test also suggest no violation of theregression assumptions of normality and homo-scedasticity.Table 2 shows the results of the multiple regres-sion analysis. The general models for the four lagperiods are all supported, as indicated by thesignificant F-values. In regard to individual vari-ables, technological resources are shown to have apositive and significant relationship with growth inmultinationality throughout the four models, bear-ing out Hypothesis 1 across time periods. Hypoth-esis 2, which predicts an inverted U-shapedrelationship between marketing resources andgrowth in multinationality, also finds support inall four regression models, confirming our conjec-ture that increased marketing resources acceleratemultinational expansion only up to a certainoptimal level.Hypothesis 3 posits that the linkage betweenorganizational slack and growth in multinational-ity is also inverted U-shaped. The curvilineartendency of the relationship is shown in all models.However, the parameter estimates are statisticallysignificant only in Model 1 and Model 2 (1-yearlagand 2-yearlag), but not in the other two models (nolag and 3-year lag). Hence Hypothesis 3 is partiallysupported. In concert with our prediction, intern-ally generated financial resources arereportedto bepositively associated with growth in multination-ality throughout the four lag periods. Nevertheless,akin to organizational slack, the parameter esti-mates are statistically significant only in Model 1and Model 2 (1-year lag and 2-year lag), but not in



10/15


Table 1 Descriptive tatisticsand correlationmatrixaVariableb Mean s.d. 1 2 3 4 5 6 7 8 91. Growth n multinationality 11.25 17.512. Technological esources 5.06 4.74 0.46(0.00)3. Marketingesources 1.34 0.23 0.18 0.58(0.01) (0.00)4. Marketingesourcessquared) 741.84 654.49 0.16 0.66 0.83(0.01) (0.00) (0.00)5. Organizationallack 455.30 1314.48 -0.08 0.04 -0.08 -0.11(0.22) (0.56) (0.23) (0.09)6. Organizationallack squared) 1,928,017 10,183,882 -0.04 0.07 -0.05 -0.07 0.92(0.53) (0.32) (0.48) (0.27) (0.00)7. Internally eneratedfinancial esources 7.98 16.42 -0.05 -0.11 -0.09 -0.15 0.08 0.08(0.42) (0.10) (0.15) (0.02) (0.24) (0.20)8. Externallyaised inancial esources 15.82 9.82 -0.10 -0.12 -0.20 -0.21 0.22 0.17 0.58(0.12) (0.06) (0.00) (0.00) (0.00) (0.01) (0.00)9. Firm ize 0.38 0.77 -0.26 -0.23 -0.40 -0.36 0.55 0.37 0.16 0.31

(0.00) (0.00) (0.00) (0.00) (0.00) (0.00) (0.01) (0.00)10. Firm ge 1.61 0.33 -0.30 -0.41 -0.26 -0.27 0.21 0.11 0.06 0.10 0.46(0.00) (0.00) (0.00) (0.00) (0.00) (0.10) (0.36) (0.12) (0.00)aForpresentationimplicity,nlythe descriptivetatistics ndcorrelationmatrix or the 3-yearagged ndependent ariables1992-1997) aregivenhere.Correlationsf no lagged(1995-2000),1-yearagged 1994-1999),and2-year agged 1993-1998) independentariables realso examined.There s a consistent attern f correlationscross he fourperiods.Significanceevelsare n the parentheses.bFirm ize and firmage are constructedn the logarithmicorm,and firmsize before ransformations expressedn thousandsof employees.Organizationallack s expressedn milliondollars.The value of marketingesources n this correlationmatrixportrayedor the 3-year aggedindependentariables1992-1997)is inthe logarithmicorm o remedy highVIFerm.All ignificanceests of correlationre two-tailed.

the other two models (no lag and 3-year lag). ThusHypothesis 4 is partially supported, too. Finally,theregression results provide partial support forHypothesis 5, which postulates a negative relation-ship between externally raised financial resourcesand growth in multinationality, as the parameterestimates arestatistically significant in Model 1 andModel 2 (1-year lag and 2-year lag), but not inModel 0 and Model 3 (no lag and 3-year lag).With respect to the control variables, both firmsize and firm age demonstrate negative relation-ships with growth in multinationality, and therelationship is statistically significant for firm sizein all four analyses but is significant for firm age inonly two models. The industrial sectors in whichfirms participatedo not have a significant effect ongrowth in multinationality across the four periods.This insignificant industry effect speaks for thegeneralizability of the results across differentindustrial segments.DiscussionIt is important to understand how foreign expan-sion activities are determined by internal resourcefactors, given the broad spectrum of firms

implementing such a business approach as astrategic alternative for organizational growth.Yet, to date, there is still a paucity of literature onthis prominent issue, and we know relatively littleabout what causes firms to expedite their interna-tional journeys. The objective of this study istherefore to assess the influences that firmresources may wield on the change in levels ofinternational involvement over time.In all, empiricalresults conform to our argumentson the importance of organizational resources forinternational growth. Specifically, within theknowledge-based category, technological and mar-keting resources are both found to significantlyaffect growth in multinationality across all lagperiods: technological resources have a positiveimpact; marketing resources impose a non-linear(inverted U-shaped) effect. All three resources inthe property-based group are also found to pro-foundly influence growth in multinationality but,interestingly, the effects are statistically significantonly in the 1-year lag and 2-year lag models.Respectively, a non-linear (inverted U-shaped)effect on growth in multinationality is shown fororganizational slack, a positive effect for internally

Journalf Internationalusinesstudies


11/15


Table 2 Resultsof ordinary east square regressionanalysisaHypothesis Variableb Model 0 Model 1 Model2 Model3(0-yearag) (1-yearag) (2-year ag) (3-year ag)1 Technologicalesources 0.70*** 0.62*** 0.82*** 0.61***

(0.26) (0.29) (0.30) (0.30)(4.22) (4.90) (5.62) (2.20)Marketingesources 0.15 0.12 0.20 0.03(0.17) (0.17) (0.03) (8.41)(5.91) (6.45) (6.10) (4.14)

2 Marketingesourcessquared) -0.71*** -0.67*** -0.88*** -0.36**(0.00) (0.00) (0.00) (0.00)(6.38) (7.50) (8.26) (4.15)Organizationallack 0.03 0.39** 0.39** 0.06(0.00) (0.00) (0.00) (0.00)

(8.66) (9.81) (11.49) (10.73)3 Organizationallack squared) -0.06 -0.29** -0.30* -0.08(0.00) (0.00) (0.00) (0.00)(6.63) (7.44) (8.60) (8.19)4 Internallyenerated inancial esources 0.01 0.28** 0.35** 0.03(0.00) (0.17) (0.18) (0.07)(1.05) (5.34) (5.51) (1.57)5 Externallyaisedinancial esources -0.01 -0.27** -0.36** -0.04(0.04) (0.22) (0.22) (0.13)(1.20) (5.70) (5.91) (1.70)

Firm ize -0.16* -0.42** -0.35*** -0.22**(2.01) (2.00) (2.00) (2.01)(2.48) (2.61) (2.72) (2.61)Firmage -0.14** -0.17** -0.06 -0.04(3.80) (3.61) (3.76) (3.74)(1.47) (1.53) (1.58) (1.61)AdjustedR2 0.26 0.36 0.25 0.28F-statistic 6.91*** 9.30*** 5.82*** 6.38***N 286 257 243 242

aThecoefficientsre standardized.tandardrrors re n the firstparentheses;ariancenflationactors re n the secondparentheses.blndustrydummy variablesare included in the models, but for presentationsimplicityregressioncoefficientsare not shown.*P


12/15


of marketing resources contributes most to inter-national growth. Implications are also deducedfrom the finding on the impact of organizationalslack. We find that the best interest for a firm thataspiresto expand abroad s to maintain an adequatelevel of slack. Excessive slack, to a large extent,signals managerial incompetence and sloth, thusdulling a firm's initiative to expand its interna-tional operations. As to internally enerated inancialresources,hey are demonstrated to be conducive tointernational growth, showing that it is importantfor firms that seek global expansion to maintain agreater level of return from current operations asthe bedrock for marching overseas. In comparison,externally aised inancialresourceslow down multi-national expansion, indicating that firms borrow-ing money from outside are bounded by capitalcosts and, to some extent, are dictated to by thecapital providers who attempt to keep firms awayfrom perilous foreign operations. This finding is inconcert with that of Henderson and Cool (2003),which demonstrates significant impact of differentfinancing channels on firms' investment behaviors.Second, by classifying resources into two cate-gories, we find that knowledge-based resources(collective goods) have more immediate and longer-lasting influences on international growth thanproperty-based resources (private goods). Bothknowledge-based resources are shown to haveconsistent, significant impact on the change inmultinationality throughout all lag periods,whereas the effects of all three property-basedresources do not appear in the no-lag model andhave vanished in the 3-year lag model. Thesefindings affirm the intrinsic differences betweenthe two strains of resources as defined in the theorydevelopment section, and lend support to thevolume of international business literature thatemphasizes the important role of knowledge-inten-sive inputs in foreign operations. In fact, it isconceivable that the effects of technological andmarketing resources endure longer, thanks mainlyto their feature of permitting recurrent consump-tion (i.e., their present use will not inhibit subse-quent consumption elsewhere). However, thiscollective-good characteristic is very likely to sufferfrom free-riding problems, and requires firms toexploit the resources instantly before they areleaked to or imitated by other firms, thus con-tributing to international growth with little timelag. In addition, the zero-lag impact of knowledge-based resources also speaks for the possibility of atwo-way causality, in which growth in multination-

ality motivated by knowledge-based resourcesmay,at the same time, foster accumulation of theresources. In other words, a firm's amassing of theresources and its increase in international involve-ment occur in tandem. Such speculation is in linewith the notions proposed by the Uppsala model(Johanson and Wiedersheim-Paul, 1975; Johansonand Vahlne, 1977) and the innovation model(Cavusgil, 1980; Cavusgil and Nevin, 1981) thatinternationalization results from and also leads to aseries of firm-specific and managerial factors withthe progression of experiential learning.Third, this study contributes to the integration ofthe literature on international business and strate-gic management. Generally, international businessresearch has suggested the complexity of foreignexpansion forbusiness organizations (e.g., Hitt et al.,1997), whereas strategic management studies havebuttressed the importance of the resource-basedapproachfor corporatedecisions (e.g., Barney,1996;Oliver,1997).Thisstudycontributesto bridging hesetwo strands of theoretical interestsby showing howthe intricate multinationality decision is affected byinternal resource conditions. Furthermore, he cur-rent researchextends the explanatory power of theRBV o geographicaldiversification,which, comparedwith product diversification,has received relativelyless attention from the RBV theorists. Our resultsindicate that the theory is equally helpful in explain-ing a firm's decision on the spread of geographicalcoverageacross national borders.Finally, this study is likely to impress uponmanagers the critical need to accumulate specificassets for swift international growth. Faced with thetrend toward economic globalization and theconstraint of firm resources, managers often needto make decisions on the extent to which theircompanies should engage in business expansionoverseas. Unfortunately, the topic of what deter-mines growth in multinationality has not receiveda systematicexamination. This study has the poten-tial to help decision-makers understand the majorinternal forces driving international growth. This inturn can guide them in making the decisions offoreign expansion. Moreover, this study empiricallydemonstrates the usefulness of specific resources,such as technological resources, in supporting growthin multinationality. Managers striving for furtherinternational expansion would be wise to build astronger inventory of knowledge-based resources thatpromote international growth.The main limitations of this study come fromthe archival nature of the secondary data. The



13/15

Firmresources and multinationality growth Chiung-Huiseng tal972

limitations, however, point to opportunities forfuture research n this area.Tobegin with, there hasnot been a uniform method for measuring multi-nationality of firms in the literature. Our relianceon a single-item indicator, the percentage of foreignsales, is based on prior studies as well as driven bydata availability from the COMPUSTAT atabase.We would like to make a plea that future researchreplicates this study using alternative measures ofmultinationality, thereby testing the robustness ofthe relationships discovered in this study orexamining other valuable implications of multi-nationality.Another potential direction for future research isto broaden the concept of multinationality. Multi-nationality of a firm in effect consists of two facets,upstream sourcing of input and downstream salesof output, of which the downstream aspect isstressed by most extant research.This downstreamemphasis has become more of a problem in recentyears, in partbecause of the growing trend of globalvalue-chain dispersion, as foreseen by Porter(1986). Accordingly, there is a need to includeupstreamactivities in the multinationality concept,particularly when outsourcing has become moreand more prevalent among multinational firms. Todo so, future research may construct a measure ofmultinationality that capturesnot only the portionof the sales generated overseas,but also the fractionof the value created abroad.Further,our empirical results are derived from asample of US large manufacturing firms. While thissampling frame controls for firm size, industrybackground, and parent nationality, it raises theissue of researchgeneralizability. Futurestudies areencouraged to cross-validate our findings in othercontexts where our research falls short.

Finally, this study is restricted to an analysis ofthe impact of internal dimensions on growth in

multinationality using a small set of resourcevariables. Future research can investigate a widerrange of internal resources, and perhaps with amore ambitious research goal of combining theeffects of both internal and external determinantsin a more complete model to explore the causes offirm multinationality. We believe that these sugges-tions should provide ample opportunities for futurescholars to advance the researchon internationali-zation of firms and make more contributions topractitioners and academicians alike.ConclusionGoing beyond priorattention to the consequences fmultinational expansion, this study focuses on theantecedents by analyzing how changes in multi-nationality are determined by the internal resource-based forces. Distinguishing between the effects ofknowledge-based and property-basedresources,wedemonstrate that both categories of resourcessignificantly impact on international growth,although the knowledge-basedresources have moreinstant and longer-lasting influences than theproperty-basedones. Toour knowledge, the currentstudy is among the very first to use the RBV toinvestigate empirically the factors driving multi-nationality. While the findings have enriched ourunderstanding of the determinants affecting howmuch further firms can go internationally, andtheir differential pace of multinational expansion,we also identify severalpromising niches for futurestudies in the hope of moving this line of inquiryforward.AcknowledgementsThispaperdrawson the dissertationof the firstauthor.We thank departmental editor Nicolai J. Foss, twoanonymous reviewers,and Shih-Fen Chen for theirvaluablecomments.

ReferencesAmit, R. and Schoemaker, P.J.H.(1993) 'Strategic assets andorganizational ent',StrategicManagement ournal 4(1): 33-46.Autio, E., Sapienza, H.j. and Almeida, J.G. (2000) 'Effects ofage at entry, knowledge intensity,and imitabilityon interna-tionalgrowth',AcademyfManagementournal3(5):909-924.Barney, .B. 1991) 'Firm esources nd sustained ompetitiveadvantage', Journalof Management17(1): 99-120.Barney, J.B. (1996) 'The resource-based theory of the firm',OrganizationScience7(5): 469.BourgeoisIII,L.J. 1981) 'On the measurement of organizationalslack',Academyof ManagementReview6(1): 29-38.Bradley,F. and Gannon, M. (2000) 'Does the firm'stechnologyand marketing profileaffect foreign marketentry?'JournalofInternationalMarketing (4): 12-36.

Buckley, P.J. and Casson, M.C. (1976) The Future of theMultinationalEnterprise,Macmillan:London.Burgel, 0. and Murray,G.C. (2000) 'The international marketentry choices of start-up companies in high-technologyindustries',Journalof InternationalMarketing (2): 33-62.Capar, N. and Kotabe, M. (2003) 'The relationship betweeninternationaldiversificationand performancein servicefirms',Journalof InternationalBusinessStudies34(4): 345-355.Caves, R.E. (1971) 'Internationalcorporations: the industrialeconomics of foreign investment', Economica 8(149): 1-27.Caves, R.E. 1996) MultinationalEnterprisend EconomicAnalysis,Cambridge UniversityPress:Cambridge.Cavusgil, S.T. (1980) 'On the internationalizationprocess offirms',EuropeanResearch (6): 273-281.



14/15

Firmresources and multinationality growth Chiung-Huiseng t al * 973

Cavusgil, S.T. and Nevin, J.R.(1981) 'Internaldeterminants ofexport marketingbehavior:an empirical nvestigation',Journalof MarketingResearch18(1): 114-119.Chamberlin,E.H. 1933) TheTheory f MonopolisticCompetition,HarvardUniversityPress:Cambridge, MA.Chen, S.S. (2005) 'Extending internalization theory: a newperspective on international technology transfer and itsgeneralization',Journalof InternationalBusinessStudies36(2):231-245.Chen, S.S. and Hennart,J.(2002) 'Japanese nvestors' choice ofjoint ventures vswholly-owned subsidiaries n the US: the roleof marketbarriers nd firmcapabilities',Journal f InternationalBusinessStudies33(1): 1-18.Cheng, J.L.C.and Kesner,I.F.(1997) 'Organizational lack andresponse to environmental shifts: the impact of resourceallocation patterns',Journalof Management23(1): 1-18.Chung, H.F.L. 2003) 'Internationalstandardizationstrategies:the experiences of Australianand New Zealand firmsoperat-ing in the greater China markets', Journalof InternationalMarketing11(3): 48-82.Contractor,F.J.,Kundu,S.K.and Hsu,C.C. (2003) 'Athree-stagetheory of international expansion: the link between multi-nationalityand performancein the service sector', JournalofInternationalBusinessStudies34(1): 5-18.Crick,D. and Jones, M.V. (2000) 'Small high-technology firmsand internationalhigh-technology markets',Journalof Inter-nationalMarketing (2): 63-85.Cyert, R.M.and March,J.G. (1963) A BehavioralTheoryof theFirm,Prentice-Hall:Englewood Cliffs,NJ.Daniels, J.D. and Bracker,J. (1989) 'Profit performance: doforeign operations make a difference?'ManagementInterna-tional Review29(1): 46-56.Davidson, W.H. and McFetridge, D.G. (1985) 'Key character-istics in the choice of international echnology transfermode',journalof InternationalBusinessStudies16(2): 5-22.Demsetz, H. (1973) 'Industry structure, market rivalry, andpublic policy', Journalof Lawand Economics 6(1): 1-9.Diamantopoulos,A. and Inglis,K.(1988) 'Identifyingdifferencesbetween high- and low-involvement exporters', InternationalMarketingReview5(2): 52-60.Doukas, J.A.and Lang,L.H.P. 2003) 'Foreigndirect investment,diversificationand firm performance',Journalof InternationalBusinessStudies34(2): 153-172.Dunning, J.H. (1981) InternationalProductionand the Multi-national Enterprise,George Allenand Unwin: London.Dunning, J.H.and McQueen, M. (1981) 'The eclectic theory ofinternationalproduction:a case studyof the internationalhotelindustry',Managerial nd DecisionEconomics (4): 197-210.Ekeledo,I.and Sivakumar,K.(2004) 'Internationalmarketentrymode strategies of manufacturingfirms and service firms:aresource-based perspective', InternationalMarketingReview21(1):68-101.Erramilli,M.K., Agarwal, S. and Kim, S.S. (1997) 'Are firm-specific advantages location-specifictoo?' Journalof Interna-tional BusinessStudies28(4): 735-757.Foss, N.J. (1997) Resources,Firms,and Strategy:A Reader n theResource-Basederspective,OxfordUniversityPress:Oxford.Gatignon, H. and Anderson, E. (1988) 'The multinationalcorporations' degree of control over foreign subsidiaries:anempirical est of a transactioncost explanation',Journal f Law,Economics, nd Organization4(2): 305-336.Genrturk, E.F. and Kotabe, M. (2001) 'The effect of exportassistanceprogramusageon exportperformance: contingencyexplanation',Journal f InternationalMarketing(2): 51-72.Geringer,J.M.,Tallman,S. and Olsen, D.M. (2000) 'Productandinternational diversification among Japanese multinationalfirms',StrategicManagementJournal21(1): 51-80.Gomes, L.and Ramaswamy,K. (1999) 'An empiricalexamina-tion of the form of the relationshipbetween multinationalityand performance', Journalof International Business Studies30(1): 173-188.

Grant, R.M. (1987) 'Multinationalityand performance amongBritish manufacturing companies', Journal of InternationalBusinessStudies18(3): 79-89.Grant, R.M., Jammine,A.P. and Thomas, H. (1988) 'Diversity,diversification,and profitabilityamong Britishmanufacturingcompanies, 1972-84', Academyof ManagementJournal31(4):771-801.Greenley, G.E. and Oktemgil, M. (1998) 'Acomparison of slackresources in high and low performing Britishcompanies',Journalof ManagementStudies35(3): 377-398.Guillen,M.F.(2003) 'Experience, mitation,and the sequence offoreign entry: wholly owned and joint-venturemanufacturingby South Koreanfirms and business groups in China, 1987-1995', Journal f InternationalBusinessStudies34(2): 185-198.Guthrie,J.P. 2001) 'Highinvolvement work practices,turnover,and productivity:evidence from New Zealand', AcademyofManagementJournal44(1): 180-190.Habib, M.M. and Victor, B. (1991) 'Strategy, structure, andperformance f USmanufacturingnd serviceMNCs:a compara-tive analysis',StrategicManagement ournal 2(8): 589-606.Henderson, J. and Cool, K. (2003) 'Corporate governance,investment bandwagons and overcapacity:an analysisof theworldwide petrochemical industry, 1975-1995', StrategicManagementJournal24(4): 349-373.Hitt, M.A., Hoskisson, R.E.and Kim, H. (1997) 'Internationaldiversification: ffects on innovation and firm performanceinproduct-diversifiedfirms', Academy of Management Journal40(4): 767-798.Ito, K. and Rose, E.L. 2002) 'Foreigndirect investment locationstrategies in the tire industry',Journalof InternationalBusinessStudies33(2): 593-602.Jensen, M.C. (1986) 'Agency costs of free cash flow, corporatefinanceandtakeovers',American conomic eview 6(2): 323-329.Johanson, J. and Vahlne, J. (1977) 'The internationalizationprocess of the firm: a model of knowledge development andincreasing foreign market commitments', Journalof Interna-tional BusinessStudies8(1): 23-32.Johanson, J. and Wiedersheim-Paul,F. (1975) 'The internation-alization of the firm:four Swedish cases', Journalof Manage-ment Studies12(3): 305-322.Jones, M.V. (1999) 'The internationalization of smallhigh-technology firms',Journalof InternationalMarketing (4):15-41.Kaldor,N. (1934) 'The equilibriumof the firm', TheEconomicJournal44(173): 60-76.Kim,W.C. and Hwang, P. (1992) 'Global strategy and multi-nationals'entry mode choice', Journalof InternationalBusinessStudies23(1): 29-53.Knight, G.A. and Cavusgil, S.T. (2004) 'Innovation, organiza-tional capabilities, and the born-global firm', Journal ofInternationalBusinessStudies35(2): 124-141.Kotabe, M., Srinivasan,S.S. and Aulakh, P.S. (2002) 'Multi-nationalityand firmperformance: he moderating role of R&Dand marketing capabilities', Journalof InternationalBusinessStudies33(1): 79-97.Levitt,T. (1983) 'Theglobalizationof markets',HarvardBusinessReview61(3): 92-102.Lu,J.W.and Beamish,P.W.(2004) 'Internationaldiversificationand firm performance:the s-curve hypothesis', AcademyofManagementJournal47(4): 598-609.Madhok,A. (1997) 'Cost, value and foreign marketentry mode:the transaction and the firm', Strategic ManagementJournal18(1):39-61.Martin,X. and Salomon, R.(2003) 'Knowledgetransfercapacityand its implications for the theory of the multinationalcorporation', Journalof InternationalBusiness Studies 34(4):356-373.Miller,D. and Shamsie,J.(1996) 'Theresource-basedview of thefirm in two environments: the Hollywood film studios from1936 to 1965', Academy of Management Journal 39(3):519-543.



15/15


Mishina, Y., Pollock, T.G. and Porac, J.F. (2004) 'Are moreresources always better for growth? Resources stickiness inmarket and product expansion', StrategicManagementJournal25(12): 1179-1197.Mone, M.A.,McKinley,W. and BarkerIII,V.L. 1998) 'Organiza-tional decline and innovation: a contingency framework',Academyof ManagementReview23(1): 115-132.Moorman,C. and Slotegraaf,R.J. 1999) 'Thecontingency valueof complementary capabilities in product development',Journalof MarketingResearch36(2): 239-257.Nohria, N. and Gulati, R. (1996) 'Is slack good or bad forinnovation?' Academy of Management Journal 39(5):1245-1264.Oliver,C. (1997) 'Sustainablecompetitive advantage: combin-ing institutionaland resource-basedviews', StrategicManage-mentJournal18(9): 697-713.Penrose, E. (1959) The Theoryof the Growth of the Firm,BasilBlackwell:Oxford.Peteraf, M.A. (1993) 'The cornerstones of competitive advan-tage: a resource-based view', Strategic ManagementJournal14(3): 179-191.Plotkin,H. (1993) 'Where are they now?' InternationalBusiness6(6): 60-65.Porter, M.E. (1986) 'Competition in Global Industries: AConceptual Framework', n M.E. Porter(ed.), CompetitionnGlobal Industries,HarvardBusiness School: Cambridge, MA,pp: 15-60.Ramanujam,V. and Varadarajan,P.R. (1989) 'Research oncorporate diversification:a synthesis', Strategic ManagementJournal10(6): 523-551.Ramaswamy,K., Kroeck,K.G.and Renforth,W. (1996) 'Measuringthe degree of internationalizationf a firm:a comment',Journalof International usinessStudies27(1): 167-177.Reuer,J.J.and Leiblein,M.J.(2000) 'Downside risk mplicationsof multinationalityand international oint ventures', Academyof ManagementJournal43(2): 203-214.Sharfman,M.P. (1985) 'Environmentalpressure,organizationalbuffersand organizational performance:a structuralequationmodel', Unpublished Doctoral Dissertation, University ofArizona,Tucson, AZ.Sharfman,M.P., Wolf, G., Chase, R.B.and Tansik,D.A. (1988)'Antecedents of organizationalslack',Academyof ManagementReview13(4): 601-614.Shrader, R.C., Oviatt, B.M. and McDougall, P.P. (2000) 'Hownew venturesexploit trade-offsamong international isk actors:lessons for the accelerated internationalization f the 21stcentury',Academyof Management ournal 3(6): 1227-1247.Silverman,B.S. (1999) 'Technological resources and the direc-tion of corporate diversification: oward an integration of theresource-based view and transaction cost economics',ManagementScience45(8): 1109-1124.Song, M., Droge, C., Hanvanich,S. and Calantone, R. (2005)'Marketing and technology resource complementarity: ananalysis of their interaction effect in two environmentalcontexts', StrategicManagementJournal26(3): 259-276.Stopford,J.M.and Wells,L.T. 1972) Managingthe MultinationalEnterprise, asic Books: New York.Sullivan,D. (1994) 'Measuring he degree of internationalizationof a firm', Journal of International Business Studies 25(2):325-342.Tabachnick, B.G. and Fidell, L.S. (2001) Using MultivariateStatistics,4th edn., Allyn& Bacon:Boston, MA.Tallman, S.B. (1991) 'Strategic management models andresource-based strategies among MNEs in a host market',

StrategicManagementJournal12(special issue):69-82.Tallman,S.B. and Li,J. (1996) 'Effectsof internationaldiversityand product diversity on the performance of multinationalfirms',Academyof ManagementJournal39(1): 179-196.Tan, D. and Mahoney, J.T. 2005) 'Examining he Penroseeffectin an internationalbusiness context: the dynamicsof Japanesefirm growth in US industries', Managerial and DecisionEconomics 6(2): 113-127.Tan, J. and Peng, M.W. (2003) 'Organizationalslack and firmperformanceduringeconomic transitions: wo studies from anemerging economy', StrategicManagementJournal 24(13):1249-1263.UNCTAD (2001) World Investment Report 2001: PromotingLinkages,UNCTAD:New York.Vachani,S. (1995) 'Enhancing he obsolescing bargaintheory:alongitudinalstudy of foreign ownership of US and Europeanmultinationals',Journalof InternationalBusinessStudies26(1):159-180.Vernon,R.(1971) Sovereignty t Bay:TheMultinational preadofUSEnterprises, asic Books: New York.Wernerfelt, B. (1984) 'A resource-based view of the firm',StrategicManagementJournal (2): 171-180.Whitelock, J. and Pimblett, C. (1997) 'The standardisationdebate in internationalmarketing',Journal f GlobalMarketing10(3): 45-61.World Trade Organization(2001) InternationalTradeStatistics2001, World TradeOrganization:Geneva.About the authorsChiung-Hui Tseng is Assistant Professorof Inter-national Business at National Cheng Kung Uni-versity, Taiwan. Her research interests includeforeign entry modes, international entrepreneur-ship, and issues of resourceallocation and interna-tional diversification in the contexts of both smallbusinesses and large corporations.Patriya Tansuhaj is Professor of Marketing atWashington StateUniversity. She served as Directorof the International BusinessInstitute. Herresearchon international business strategies and cross-national marketing practices has been publishedin Journal of Marketing,Journal of InternationalMarketing, and International Marketing Review,among others.William Hallagan is Associate Professor of Eco-nomics in the School of Economic Sciences atWashington StateUniversity,Pullman, Washington.James McCullough is George F Jewett Distin-guished Professor of International Business andDirector of the School of Business at the Universityof Puget Sound in Tacoma,Washington.

Acceptedby NicolaiJuulFoss, DepartmentalEditorand Arie YLewin,Editor-in-Chief, November2006. Thispaperhas been with the authorsfor threerevisions.


Documents

Eco No Metric Journal