Multinational performance and the geography of FDI: evidence from 46 countries

Yang, Yong, Martins, Pedro S and Driffield, Nigel (2013) Multinational performance and the geography of FDI: evidence from 46 countries. Management International Review, 53 (6). pp. 763-794. ISSN 0938-8249

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Abstract

•The literature on multinationality and firm performance has generally disregarded the role of geography. However, the location of FDI assumes particular importance in terms of the link between multinationality at the firm level. The purpose of this paper is to consider the multinationality-performance relationship within the context of greater emphasis on the importance of location, but also emphasising the importance of the location decision.
•This paper draws on firm-level data covering over 16,000 multinationals from 46 countries over the period of 1997–2007 and allows for different effects upon the performance of the multinational firm depending on the level of development of the host economy.
•In our results, we find a clear positive relation between multinationality and firm performance. However, investment in developing countries is associated with larger effects on performance than in the case of investment in developed countries. We also find that the return to investing in developing countries is U-shaped.
•This indicates that multinationals are likely to face losses in the early stage of their investment in developing countries before the positive returns are realized. Overall, our results suggest that the net gains for multinationals from greater geographical diversification have not yet been fully explored. Geographical diversification into developing countries may be an important source of competitive advantages that deserves more serious consideration from business leaders and academics alike.

Item Type: Article
Keywords: Multinationality,Firm performance, Location choices, Source country
Schools and Departments: School of Business, Management and Economics > Business and Management
Subjects: H Social Sciences
Depositing User: Yong Yang
Date Deposited: 09 Aug 2016 16:14
Last Modified: 31 Aug 2016 14:14
URI: http://sro.sussex.ac.uk/id/eprint/62254
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