UNCTAD's Degree of Internationalization and Its Effect on Subjective and Objective Performance: Evidences from Brazilian TNCs

Informações

Código: ESO2107
Divisão: ESO - Estratégia em Organizações
Tema de Interesse: Tema 08 - Negócios Internacionais

Autores

Lívia Lopes Barakat, Sherban Leonardo Cretoiu, Jase Ryan Ramsey

Resumo

Brazilian Transnational Corporations (BTNCs) have been increasingly engaging in foreigndirect investment over the past decade. With that in mind, there is a wide range of strategicchoices that BTNCs must undertake when internationalizing in terms of entry modes, degreeof ownership, control, centralization, among others. That results in different levels ofinternationalization. For years, several scholars have attempted to establish a reliable measureof the degree of internationalization. Whereas some rely on a single-item usually based onforeign sales, others propose a multidimensional measure that considers FDI, employmentand geographic dispersion, among other indicators. Therefore, this paper aims to assessBTNCs transnationality index based on two different measures: the UNCTAD’stransnationality index and a composite index that includes other measures such as number ofcountries and international experience. The UNCTAD’s index considers the average of threedimensions: foreign assets divided by total assets, foreign revenues divided by total revenuesand foreign employees divided by total employees. We also assess the impact of the degree ofinternationalization on both objective and subjective performance. In order to test ourhypothesis, we propose a model of internationalization assuming a positive impact of thedegree of internationalization on foreign performance. An empirical study was conductedwith 41 BTNCs from a population of 71, regarding its international activities in 2008 and2009. Data was entered and analyzed in the softwares SPSS and Amos using StructuralEquation Modeling and Tests of Multivariate Assumptions. Our results show that the moreinternationalized a firm is, the better it performs overseas. Firms with a higher degree ofinternationalization were found to be more satisfied with foreign sales, sales growth, profitsand market share. Additionally, internationalization leads to a higher percentage of foreignprofits over total, and an increase in foreign return on sales. On the other hand, return onassets is not significantly impacted by the transnationality index. Furthermore, we showedthat the UNCTAD’s transnationality index is more reliable in this context than a construct thatalso includes other internationalization measures. Thus, firms may see the internationalizationstrategy as a way to enhance foreign performance. Finally, internationalization increasesobjective performance and also executive’s satisfaction with performance. Yet, the effect ofinternationalization is stronger on objective measures.Keywords: Internationalization, Subsidiary Performance,

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