IDEAS home Printed from https://ideas.repec.org/a/eee/worbus/v45y2010i1p93-103.html
   My bibliography  Save this article

The impact of institutional distance on the international diversity-performance relationship

Author

Listed:
  • Chao, Mike Chen-Ho
  • Kumar, Vikas

Abstract

We investigated the impact of institutional distance on the international diversity-performance relationship. We first discussed the international diversity-performance relationship for large multinational firms and later showed the moderation effect of regulative and normative institutional distance. Based on a sample of Fortune 500 firms, we found an inverted U-shaped curve. Regulative institutional distance has a negative moderating effect on the international diversity-performance relationship, while normative institutional distance shows a positive effect.

Suggested Citation

  • Chao, Mike Chen-Ho & Kumar, Vikas, 2010. "The impact of institutional distance on the international diversity-performance relationship," Journal of World Business, Elsevier, vol. 45(1), pages 93-103, January.
    • Handle: RePEc:eee:worbus:v:45:y:2010:i:1:p:93-103
    as

    Download full text from publisher

    File URL: https://www.sciencedirect.com/science/article/pii/S1090951609000236
    Download Restriction: Full text for ScienceDirect subscribers only
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Chang, Shao-Chi & Wang, Chi-Feng, 2007. "The effect of product diversification strategies on the relationship between international diversification and firm performance," Journal of World Business, Elsevier, vol. 42(1), pages 61-79, March.
    2. J. Michael Geringer & Paul W. Beamish & Richard C. Dacosta, 1989. "Diversification strategy and internationalization: Implications for mne performance," Strategic Management Journal, Wiley Blackwell, vol. 10(2), pages 109-119, March.
    3. Redding, Gordon, 2008. "Separating Culture from Institutions: The Use of Semantic Spaces as a Conceptual Domain and the Case of China," Management and Organization Review, Cambridge University Press, vol. 4(2), pages 257-289, July.
    4. 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.
    5. Henisz, Witold J. & Williamson, Oliver E., 1999. "Comparative Economic Organization—Within and Between Countries," Business and Politics, Cambridge University Press, vol. 1(3), pages 261-277, November.
    6. Errunza, Vihang R & Senbet, Lemma W, 1984. "International Corporate Diversification, Market Valuation, and Size-Adjusted Evidence," Journal of Finance, American Finance Association, vol. 39(3), pages 727-743, July.
    7. Oded Shenkar, 2001. "Cultural Distance Revisited: Towards a More Rigorous Conceptualization and Measurement of Cultural Differences," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 32(3), pages 519-535, September.
    8. Beamish, Paul W. & Inkpen, Andrew C., 1998. "Japanese firms and the decline of the Japanese expatriate," Journal of World Business, Elsevier, vol. 33(1), pages 35-50.
    9. Mohammed M. Habib & Bart Victor, 1991. "Strategy, structure, and performance of U.S. manufacturing and service MNCs: A comparative analysis," Strategic Management Journal, Wiley Blackwell, vol. 12(8), pages 589-606, November.
    10. Deepak K. Datta & Nandini Rajagopalan & Abdul M. A. Rasheed, 1991. "Diversification and Performance: Critical Review and Future Directions," Journal of Management Studies, Wiley Blackwell, vol. 28(5), pages 529-558, September.
    11. Peter Buckley & John Dunning & Robert Pearce, 1978. "The influence of firm size, industry, nationality, and degree of multinationality on the growth and profitability of the World’s largest firms, 1962–1972," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 114(2), pages 243-257, June.
    12. Peter J. Buckley & Mark Casson, 2010. "Analysing Foreign Market Entry Strategies: Extending the Internalisation Approach," Palgrave Macmillan Books, in: The Multinational Enterprise Revisited, chapter 8, pages 177-204, Palgrave Macmillan.
    13. Tarun Khanna & Krishna Palepu, 2000. "Is Group Affiliation Profitable in Emerging Markets? An Analysis of Diversified Indian Business Groups," Journal of Finance, American Finance Association, vol. 55(2), pages 867-891, April.
    14. Robert M Grant, 1987. "Multinationality and Performance among British Manufacturing Companies," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 18(3), pages 79-89, September.
    15. Phillip M Rosenzweig & Nitin Nohria, 1994. "Influences on Human Resource Management Practices in Multinational Corporations," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 25(2), pages 229-251, June.
    16. Brock, David M. & Yaffe, Tal & Dembovsky, Mark, 2006. "International diversification and performance: A study of global law firms," Journal of International Management, Elsevier, vol. 12(4), pages 473-489, December.
    17. Pangarkar, Nitin, 2008. "Internationalization and performance of small- and medium-sized enterprises," Journal of World Business, Elsevier, vol. 43(4), pages 475-485, October.
    18. Gary Hamel, 1991. "Competition for competence and interpartner learning within international strategic alliances," Strategic Management Journal, Wiley Blackwell, vol. 12(S1), pages 83-103, June.
    19. Anil K. Gupta & Vijay Govindarajan, 2000. "Knowledge flows within multinational corporations," Strategic Management Journal, Wiley Blackwell, vol. 21(4), pages 473-496, April.
    20. J Markham Collins, 1990. "A Market Performance Comparison of U.S. Firms Active in Domestic, Developed and Developing Countries," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 21(2), pages 271-287, June.
    21. Stephen B Tallman, 1988. "Home Country Political Risk and Foreign Direct Investment in the United States," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 19(2), pages 219-234, June.
    22. Contractor, Farok J. & Kumar, Vikas & Kundu, Sumit K., 2007. "Nature of the relationship between international expansion and performance: The case of emerging market firms," Journal of World Business, Elsevier, vol. 42(4), pages 401-417, December.
    23. Cho, Kang Rae & Padmanabhan, Prasad, 2005. "Revisiting the role of cultural distance in MNC's foreign ownership mode choice: the moderating effect of experience attributes," International Business Review, Elsevier, vol. 14(3), pages 307-324, June.
    24. Farok J. Contractor, 2007. "Is international business good for companies? The evolutionary or multi-stage theory of internationalization vs. the transaction cost perspective," Management International Review, Springer, vol. 47(3), pages 453-475, June.
    25. Mike Peng & Andrew Delios, 2006. "What determines the scope of the firm over time and around the world? An Asia Pacific perspective," Asia Pacific Journal of Management, Springer, vol. 23(4), pages 385-405, December.
    26. Chari, Murali D.R. & Devaraj, Sarv & David, Parthiban, 2007. "International diversification and firm performance: Role of information technology investments," Journal of World Business, Elsevier, vol. 42(2), pages 184-197, June.
    27. Gordon Redding, 2008. "Separating Culture from Institutions: The Use of Semantic Spaces as a Conceptual Domain and the Case of China," Management and Organization Review, The International Association for Chinese Management Research, vol. 4(2), pages 257-289, July.
    28. Sanjaya Lall, 1985. "The Recent Growth of the Largest US Multinationals," Palgrave Macmillan Books, in: Multinationals, Technology and Exports, chapter 2, pages 23-37, Palgrave Macmillan.
    29. Thomas, Douglas E., 2006. "International diversification and firm performance in Mexican firms: A curvilinear relationship?," Journal of Business Research, Elsevier, vol. 59(4), pages 501-507, April.
    30. N Capar & M Kotabe, 2003. "The relationship between international diversification and performance in service firms," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 34(4), pages 345-355, July.
    31. Winfried Ruigrok & Wolfgang Amann & Hardy Wagner, 2007. "The internationalization-performance relationship at Swiss firms: A test of the S-shape and extreme degrees of internationalization," Management International Review, Springer, vol. 47(3), pages 349-368, June.
    32. Rolf Bühner, 1987. "Assessing international diversification of West German corporations," Strategic Management Journal, Wiley Blackwell, vol. 8(1), pages 25-37, January.
    33. Michael A Witt & Arie Y Lewin, 2007. "Outward foreign direct investment as escape response to home country institutional constraints," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 38(4), pages 579-594, July.
    34. Luis R Gómez-Mejia & Leslie E Palich, 1997. "Cultural Diversity and the Performance of Multinational Firms," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 28(2), pages 309-335, June.
    35. Jane W. Lu & Paul W. Beamish, 2001. "The internationalization and performance of SMEs," Strategic Management Journal, Wiley Blackwell, vol. 22(6‐7), pages 565-586, June.
    36. Nakiye Boyacigiller, 1990. "The Role of Expatriates in the Management of Interdependence Complexity and Risk in Multinational Corporations," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 21(3), pages 357-381, September.
    37. Srilata Zaheer & Elaine Mosakowski, 1997. "The Dynamics Of The Liability Of Foreignness: A Global Study Of Survival In Financial Services," Strategic Management Journal, Wiley Blackwell, vol. 18(6), pages 439-463, June.
    38. Andreas Bausch & Mario Krist, 2007. "The effect of context-related moderators on the internationalization-performance relationship: Evidence from meta-analysis," Management International Review, Springer, vol. 47(3), pages 319-347, June.
    39. Lilach Nachum, 2004. "Geographic and Industrial Diversification of Developing Country Firms," Journal of Management Studies, Wiley Blackwell, vol. 41(2), pages 273-294, March.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Arte, Pratik & Larimo, Jorma, 2022. "Moderating influence of product diversification on the international diversification-performance relationship: A meta-analysis," Journal of Business Research, Elsevier, vol. 139(C), pages 1408-1423.
    2. Contractor, Farok J. & Kumar, Vikas & Kundu, Sumit K., 2007. "Nature of the relationship between international expansion and performance: The case of emerging market firms," Journal of World Business, Elsevier, vol. 42(4), pages 401-417, December.
    3. Benito-Osorio, Diana & Colino, Alberto & Guerras-Martín, Luis Ángel & Zúñiga-Vicente, José Ángel, 2016. "The international diversification-performance link in Spain: Does firm size really matter?," International Business Review, Elsevier, vol. 25(2), pages 548-558.
    4. Xiao, Simon Shufeng & Jeong, Insik & Moon, Jon Jungbien & Chung, Chris Changwha & Chung, Jaiho, 2013. "Internationalization and Performance of Firms in China: Moderating Effects of Governance Structure and the Degree of Centralized Control," Journal of International Management, Elsevier, vol. 19(2), pages 118-137.
    5. Yong Yang & Nigel Driffield, 2012. "Multinationality-Performance Relationship," Management International Review, Springer, vol. 52(1), pages 23-47, February.
    6. Garbe, Jan-Nicolas & Richter, Nicole Franziska, 2009. "Causal analysis of the internationalization and performance relationship based on neural networks -- advocating the transnational structure," Journal of International Management, Elsevier, vol. 15(4), pages 413-431, December.
    7. Wirginia Doryń & Dorota Stachera, 2008. "Wpływ internacjonalizacji na wyniki ekonomiczne największych polskich przedsiębiorstw przemysłowych," Gospodarka Narodowa. The Polish Journal of Economics, Warsaw School of Economics, issue 11-12, pages 95-114.
    8. Nicole Franziska Richter, 2014. "Information Costs in International Business: Analyzing the Effects of Economies of Scale, Cultural Diversity and Decentralization," Management International Review, Springer, vol. 54(2), pages 171-193, April.
    9. Yong Yang & Pedro S. Martins & Nigel Driffield, 2013. "Multinational Performance and the Geography of FDI," Management International Review, Springer, vol. 53(6), pages 763-794, December.
    10. Quyen T. K. Nguyen, 2017. "Multinationality and Performance Literature: A Critical Review and Future Research Agenda," Management International Review, Springer, vol. 57(3), pages 311-347, June.
    11. Joonho Shin & Xavier Mendoza & Changbum Choi, 2022. "Do internationalizing business group affiliates perform better after promarket reforms? Evidence from Korean SMEs," Asia Pacific Journal of Management, Springer, vol. 39(2), pages 805-841, June.
    12. 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.
    13. Buigues, Pierre-André & Lacoste, Denis & Lavigne, Stéphanie, 2015. "When over internationalized companies reduce their international footprint," International Business Review, Elsevier, vol. 24(6), pages 1039-1047.
    14. Heyder, Matthias & Makus, Christian & Theuvsen, Ludwig, 2011. "Internationalization and Firm Performance in Agribusiness: Empirical Evidence from European Cooperatives," International Journal on Food System Dynamics, International Center for Management, Communication, and Research, vol. 2(1), pages 1-17, September.
    15. Wang, Chi-Feng & Chen, Li-Yu & Chang, Shao-Chi, 2011. "International diversification and the market value of new product introduction," Journal of International Management, Elsevier, vol. 17(4), pages 333-347.
    16. Andreas Bausch & Mario Krist, 2007. "The effect of context-related moderators on the internationalization-performance relationship: Evidence from meta-analysis," Management International Review, Springer, vol. 47(3), pages 319-347, June.
    17. Borda, Armando & Geleilate, José-Mauricio G. & Newburry, William & Kundu, Sumit K., 2017. "Firm internationalization, business group diversification and firm performance: The case of Latin American firms," Journal of Business Research, Elsevier, vol. 72(C), pages 104-113.
    18. Nejat Capar & Ravi Chinta & Fiona Sussan, 2015. "Effects of International Diversification and Firm Resources on Firm Performance Risk," Journal of Management and Strategy, Journal of Management and Strategy, Sciedu Press, vol. 6(1), pages 10-20, February.
    19. Ivan De Noni & Roberta Apa, 2015. "The moderating effect of exploitative and exploratory learning on internationalisation–performance relationship in SMEs," Journal of International Entrepreneurship, Springer, vol. 13(2), pages 96-117, June.
    20. Khavul, Susanna & Pérez-Nordtvedt, Liliana & Wood, Eric, 2010. "Organizational entrainment and international new ventures from emerging markets," Journal of Business Venturing, Elsevier, vol. 25(1), pages 104-119, January.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:worbus:v:45:y:2010:i:1:p:93-103. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: https://www.elsevier.com/wps/find/journaldescription.cws_home/620401/description#description .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.