The performance implications of international intensity, diversity, and distance

Abstract

We extend international strategy research by unbundling distinctive facets of internationalization and explaining the unique causal mechanisms and contingencies underlying their respective performance implications. By discerning the effects of intensity, diversity and distance of internationalization we reconcile inconsistent evidence in prior research on the implications of internationalization. Using data on Japanese firms and their foreign subsidiaries during the period 1985 to 2003, we reveal that international intensity and distance produce sigmoid effects on firm performance, yet for different reasons. In turn, international diversity generates a U-shaped performance effect. Interfirm heterogeneity in the performance implications of internationalization is further explained by showing that a firm's international experience enhances the performance effects of international diversity, while the international experience of its peers' helps improve the performance effects of international diversity and intensity. Yet, neither type of experience improves the effect of international distance on performance.