Measurement, motives and performance

Question 1

What are the differnt motives for internationalization?

Answer 1

Valuedriven vs. manager-driven

Value-driven:

• Scale benefits: Gaining new customers, economics of scale
• Arbitrage benefits: Access to resources, flexibility, learning, risk reduction, tax advantages
• Competitive pressures: counter competition, foreign competition

Manager-driven:
Increase in status, increase in job-safety and self-fulfillment

Question 2

Do we always get economics of scale from going abroad?

Answer 2

Certain criterias must be fulfilled for this to happen.

• All pontential on home market must be utilized.
• The cost from going abroad should not exclude the advantage of MES.
• Depends on where the firm already is on the MES-curve

Question 3

How does going abroad affect the buttom-line?

Answer 3

Look at different graph of relationship between performance and multinationality?:

1. u-shaped
2. inverted
3. sigmoid

Question 4

What are the differnence between inernationality, multinationality and transanationality?

Answer 4

§ Internationality: International companies are importers and exporters, they have no investment outside of their home country.

§ Multinationality = Multinational companies operate in more than one country and have a centralized management system. Doe have subsidiaries.

§ Transnationality = Transnational companies have many companies around the world but do not have a centralized management system. Do not have own subsidiary but instead many companies which maintain their own systems.

Question 5

How to measure degree of multinationaoity=

Answer 5

Foregin sales / total sales* 100. Does however not tell us about the portfolio. Other measure: counts of employee or diversity in terms of culture.

Question 6

What articles/researches on motives and performance?

Answer 6

Hennart 2007 and

Li L. 2007. Multinationality and performance

Question 7

What are economics of scale and minimum efficient scale? Draw and explain

Answer 7

When average cost decreases as
output increases, there are economies
of scale.
Ø When average cost increases as
output increases, we are facing a
situation of diseconomies of scale.
Ø When average cost does not change
with a change in output, we have
constant return to scale

Question 8

Explain and draw the positive model PM, the negative modelm the sigmoid curve, the U-shaped and inverted U-shaped

Answer 8

Positive model: Multinational firms invest abroad because they obtain monopolistic advantages and hence can generate higher profits than those achieved by local competitors.

Negative model: Multinationality leads to value destructions, inefficient use of assets

The inverted U-shaped model:
Initial phase: benefits rise faster than the associated costs. Investments are not critical.
However, increased complexity, cost of communication, coordination, agency. > lower profits.

The U-shaped model:
Phase 1: increased involvmennt leads to increasing inbalance. -> inferior performance. The after reconfiguration of the structure, processes of the firm lods to better performance.

The Sigmoid model:
Internationalizing firms encountes
benefits and costs. Ø Costs result from both liabilities of foreignness and newness, and
coordination, control, and agency costs. Ø With an increase in multinationality liabilities of foreignness and newness decrease, overcompensating other costs. Ø Due to increase in benefits, an overall positive relationship is encountered. Ø Finally, coordination, control and agency costs overcompensate benefits
of further internationalization.

Question 9

Critique of MP models

Answer 9

Li L. 2007. Multinationality and performance:

The key message: No generally valid M–P linkage. Instead, the M–P relationship research should be conducted on the basis of an improved conceptualization of the key constructs of multinationality and performance, and by taking into account the conditions such as the internationalization motives, the reverse impact of firm performance on multinationality, as well as the specific contexts.

Question 10

What MP-model fits Tesla?

Answer 10

• Depends on our definition of multinationality
• Depends on the given distance from the home firm to foretin country. How difficult is it?
• Timing

Question 11

Explain the PM relaitonship

Answer 11

That the manger have a big interest in driving internationalization or own benefits. Behavioral motive.