Determinants of profitability in international industries
Abstract
This study empirically examined relationships between performance and the international strategy of the firm in multidomestic and global industries. The performance measures used were expert rating, sales growth, return on assets, return on sales, sales to asset ratio, return on equity and stock market returns. The international strategy dimensions considered were international interdependence and international coordination. The relationship between performance and the organization structure of the firm was also examined. The sample consisted of 20 firms each in the following five industries: aerospace, auto parts, apparel, semiconductor and computer. The firms were publicly traded U.S. firms with annual sales exceeding $100 million. Primary data was obtained by a survey of experts and managers. Reliability and validity checks were performed on the primary data. Secondary data was obtained from CRSP tapes, annual reports, and Standard and Poors' reports. Analysis of covariance was used to analyze the data. Consistently, across different models used, support was found for the proposition that the level of international interdependence and international coordination should be matched for better performance. The best results were obtained however when firms maintained a higher level of international coordination than demanded solely by the level of international interdependence. The most significant results were obtained when the performance measures were adjusted for risk. Surprisingly, the results held for both multidomestic and global industries. Geographic divisions followed by functional organizations outperformed product division and matrix organization structures.
Degree
Ph.D.
Advisors
Schendel, Purdue University.
Subject Area
Management|Business community|Business costs
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