Influence of MNC Network Configuration Patterns on the Volatility of Firm Performance: An Empirical Investigation

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Previous studies examining the influence of internationalization on the volatility of a firm's performance have found inconsistent empirical evidence. Earlier studies support a reduction in volatility resulting from a higher level of international operations. However, more recent studies have found evidence supporting a positive correlation between internationalization and various measures of firm risk. This study suggests that these results are inconclusive because of their narrow conceptualization of international strategy as a one-dimensional construct. This paper suggests that two dimensions implicit in the configuration patterns of MNC networks and their respective interaction may have distinct effects on performance volatility. Regression results using a sample of 320 U.S. firms from 133 SIC segments provide evidence supporting this view. Consistent with the earlier literature, the empirical results support the reduction in volatility derived from a greater dispersion of international operations. In addition, the global integration dimension of an MNC network configuration increases exposure to potential performance swings. Lastly, the interaction term between global integration and geographic dispersion tends to be negatively associated with volatility. These results help reconcile the prior literature and provide evidence for the multidimensional nature of the internationalization construct.

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