Alphabet soup: the relationship between multinationality and firm performance

Abstract

We specifically address previously identified deficiencies in the multinationality-performance literature and show no evidence of a consistent relationship between a firm’s level of internationalisation and its performance by any metric for 803 companies from 11 European countries over a 19-year period from 1998 to 2016. We find that in many cases domestic firms outperform more international firms. We contribute both empirically and methodologically by using more accurate dynamic measures of multinationality, alternative financial and market-based performance measures, and an extended geographic focus. We conclude that a firm’s degree of multinationality does not consistently affect performance either positively or negatively, and the competing ‘alphabet-soup’ of shape-based multinationality-performance findings in the literature only serves to confirm our findings.

Keywords:

• Multinationality and performance
• globalisation
• internationalisation

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes

1 Some firms use classifications such as EMEA (Europe, Middle-East and Africa) which we classify as three regions in accordance with the ABHK model. Asia Pacific is being classified as two regions. Many firms use additional classifications such as “others”, “other foreign” or “rest of the world”, to account for all remaining items after the most significant areas have been covered. When such a classification is noticed, we add one region. If a firm for example has sales in Germany, Europe and “other”, we assign a score of 3 regions.

2 Datastream use the annualised earnings per share that may reflect the last financial year or be derived from an aggregation of interim period earnings.

Additional information

Notes on contributors

Cormac Mullen

Dr. Cormac Mullen is a Visiting Researcher at Trinity College Dublin. Dr. Martha O’Hagan Luff is an Assistant Professor in Finance at Trinity College Dublin.

Martha O’Hagan Luff

Dr. Cormac Mullen is a Visiting Researcher at Trinity College Dublin. Dr. Martha O’Hagan Luff is an Assistant Professor in Finance at Trinity College Dublin.