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the Multi-Stage or Evolutionary Perspective (Stage 2 (Later…
the Multi-Stage or Evolutionary Perspective
Stage 1 (Early Internationalization)
the company’s incremental costs of international expansion
a firm encounters liabilities of foreignness
The Performance over Multinationality function has a negative slope.
Stage 2 (Later Internationalization)
a. Knowledge acquired from abroad
Increases its ability to pick up on foreign knowledge that domestic or
less internationalized rivals cannot access
b. Accessing or “arbitraging” cheaper inputs
accessing cheaper inputs abroad can also be achieved through the market
ceteris paribus
c. Exploitation of firm-specific assets carried to each foreign market
A multinational company, would quickly be dissipated to the pointwhere the foreign company would soon be reduced to earning only “normal” profit.
d. Accumulation of market power because of wide multinational presence
In many sectors, being large and multinational enables a company to establish its preferred technical standars and protocols
f. Geographical diversification
geographical diversification can indeed be an advantage
e. International scale
a firm present and selling in many countries
is
is better positioned to assume the risks of larger R&D budgets
than its less internationalized rivals.
better able to amortize huge R&D outlays that are today needed in hightech sectors
g. Internationalization experience
the accumulated and
better organizational ability, over time, to reproduce the firm in foreign locations.
Stage 3 (Excessive Internationalization)
“… firms which are not at their
optimum degree of international diversification will experience lower performance”