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A theoretical assessment of the empirical literature on the impact of multinationality on performance
Author(s) -
Hennart JeanFrançois
Publication year - 2011
Publication title -
global strategy journal
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 2.814
H-Index - 24
eISSN - 2042-5805
pISSN - 2042-5791
DOI - 10.1002/gsj.8
Subject(s) - operationalization , profitability index , economics , value (mathematics) , industrial organization , transaction cost , point (geometry) , microeconomics , business , mathematics , statistics , philosophy , geometry , epistemology , finance
I assess the theoretical basis for the existence of a relationship between the size of a firm's foreign footprint (its multinationality) and its performance. I argue that multinationality results from a firm's choice between coordinating internally the stages of its value chain and letting them be organized on the market and hence that there are no reasons to expect net gains from an increase or a decrease in multinationality, the only profitability impact coming from a firm having made the wrong choice and being over‐ or under‐integrated compared to the optimum. I then show that the way the literature has operationalized multinationality does not match the theoretical arguments it has advanced. I conclude that a reassessment of the literature is overdue and point to some new directions.