Executive Summary
Firms from nontriad countries, especially Asia—such as Huawei from China, Jollibee from the Philippines, and Samsung from South Korea—are increasingly turning to international markets for growth and profits. This ascendance of Asian nontriad firms is a relatively recent phenomenon in international marketing. Despite this topic’s importance, the lack of data and the neglect of researchers have left this issue largely unexamined. As a result, little is known about the degree of success achieved by these firms in their quest to internationalize and the drivers that lead to their success in the international marketplace.
Johnson, Yin, and Tsai attempt to overcome these shortcomings by addressing the following questions: (1) What is the relationship between internationalization and profitability for firms from Asian nontriad markets? and (2) What are the drivers of profitability for such firms as they increase their global reach? To circumvent the short history of internationalization of firms from Asian nontriad markets, the authors studied firms from a newly industrialized country, Taiwan. Taiwanese firms have had a reasonably long history of internationalization. Unlike other emerging economies, such as India, China, Russia, and Brazil, in Taiwan, many firms have been expanding internationally for at least three decades. This provides a large enough population of firms relevant to the study.
The key findings are as follows: (1) The internationalization–performance relationship is characterized by a joint U + N shape, (2) learning capacity is positively associated with international performance, and (3) research and development (R&D) intensity is not a key driver of performance.
The results indicate that the relationship between internationalization and performance for Taiwanese firms has three distinct stages. The first stage of internationalization hurts firm performance. In the second stage, as internationalization increases, firm performance improves. In the third stage, another decline in firm performance occurs.
Consistent with the resource-based view of the firm, the results indicate that success in internationalization depends not merely on the possession of distinctive capabilities but also on the capacity to learn and create new capabilities. Contrary to previous studies in international business, the results show that R&D intensity is not a significant driver of firm performance as it expands internationally. A possible explanation for the negative impact of R&D on performance is that Taiwan is the original equipment manufacturer island of the world, and thus R&D investments are counterproductive.
The findings suggest three implications for firms globalizing from emerging markets, especially culturally similar Asian nontriad countries such as China. First, firms from Asian nontriad economies should be cautious in pursuing their globalizing strategies. Their performance tends to suffer at the early stages of globalization. However, if they persist, they tend to succeed in the second stage, after which their performance is likely to decline yet again as they keep expanding their operations internationally. Second, it is important for managers of firms from Asian nontriad economies to develop the capacity to learn new knowledge in the ever-changing international marketplace. Given that the managerial experience of Asian nontriad firms may not help them, they may need to establish their overseas expansion by hiring locals or at least creating a healthy blend of local talents with managers from home countries. Third, firms from Asian nontriad economies should carefully balance spending on R&D with the spending needed for internationalization. The findings suggest that these firms should not emphasize R&D while trying to internationalize.
Biography
Dr. Joseph Johnson is Associate Professor of Marketing at the University of Miami. His research interests are: the measurement of consumer biases in financial markets, stock market valuation of marketing strategy, profitable customization of marketing promotions and the evaluation of firm performance in international markets. His research has appeared in leading journals such as the Journal of Consumer Research, Marketing Science, Journal of Marketing, Journal of the Academy of Marketing Science and Journal of Optimization Theory and Applications.
Dr. Eden Yin is a university lecturer in Marketing at the Judge Business School, Cambridge University. He received his Ph.D. from the Marshall Business School, University of Southern California, Los Angeles. His principal research interests are new product growth, consumer innovativeness, and the role of network effects in driving the success or failure of high tech products. He has published his work in Marketing Science, Journal of Marketing Research, Management International Review, Journal of International Marketing and others.
Hueiting Tsai is a doctoral student at the Judge Business School, Cambridge University. She has received her B.A. from Taiwan National University, a M.A. from Oxford University. Her research area centers on the internationalization strategies for firms from emerging economies.