Value adding in foreign markets: A three‐country study of associations of strategy and performance

The purpose of this paper is to extend our knowledge of industrial firms' international strategy implementation by exploring key associations pertaining to types of value adding in foreign markets. The questions are: how are types of value adding in foreign markets associated with differentiation attributes? How are the types associated with the performance of foreign units?

A hypothesized model is developed. The key terms (type of value adding, differentiation attributes, financial performance) are operationalized. A questionnaire was used to collect the quantitative data necessary to test the hypotheses using ANOVA analyses. The questions were answered by managers of 191 subsidiaries of Swedish manufacturing firms in Germany, the UK and the USA.

Firms with product development in foreign markets are associated with a limited focus on product attributes in trying to receive orders compared with firms without such local value adding. Local customer services are related to a limited emphasis on product attributes as well, but such services are associated with an emphasis on customer flexibility attributes. Foreign product development and customer services are associated with high performance. Interpretations of the findings are discussed.

The study contributes theoretically as it extends our knowledge of international strategy implementation. In the search for the type of value adding in a foreign market, the industrial firm is recommended to be aware of the general associations among the types, and the differentiation attributes and performance established in the study.

The application of a local perspective goes beyond what has been done in the dominant head quarter studies in previous research. Another key value is the analysis of perceptual data collected from managers responsible for foreign subsidiaries.