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Asia Pacific Journal of Management
Erschienen in: Asia Pacific Journal of Management 3/2012

01.09.2012

The impact of internationalization on performance and innovation: The moderating effects of ownership concentration

verfasst von: Shou-Min Tsao, Guang-Zheng Chen

Erschienen in: Asia Pacific Journal of Management | Ausgabe 3/2012

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Abstract

Researchers in international business have long been interested in understanding the impact of internationalization on performance and innovation. However, prior studies of this research stream offer mixed results. This study contributes to this research stream by employing agency theory to investigate how ownership concentration affects the performance and innovation implications of internationalization. Specifically, we examine two primary effects of ownership concentration: the incentive alignment effect, proxied by the controlling shareholder’s cash flow rights, and the entrenchment effect, proxied by the divergence between control rights and cash flow rights of the controlling shareholder. Based on a sample of Taiwan’s publicly listed firms, we find that the incentive alignment effect moderates the relation between internationalization and performance and innovation positively and the entrenchment effect moderates the relation negatively. These findings shed light on the mixed results of the literature. In addition, most countries outside the United States and the United Kingdom have high ownership concentration; therefore, our results may be generalizable to other settings, providing insight into the role of corporate governance in internationalization.
Vorheriger Artikel Effects of perceptions on LMX and work performance: Effects of supervisors’ perception of subordinates’ emotional intelligence and subordinates’ perception of trust in the supervisor on LMX and, consequently, performance
Nächster Artikel Why do business groups continue to matter? A study of market failure and performance among Indian manufacturers

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Fußnoten
1
In these countries with high ownership concentration, a controlling owner is defined as the shareholder who has the most control rights and is not controlled by anyone else.
 
2
Claessens and colleagues (2000, 2002) reported that Taiwanese listed firms are characterized by a separation of control and ownership, which is analogous to the other East Asia countries.
 
3
Our sample is restricted to multinational firms because they are likely to provide the most complex managerial contexts, which tend to produce the most severe agency problems.
 
4
Our results are qualitatively the same when we use alternative control cutoffs, such as 10% and 20%, as employed by La Porta and colleagues (1999).
 
5
For instance, if a company is controlled by a family, the definition of the largest ultimate owner contains those individuals with blood and marriage ties to the immediate family and all of the legal entities controlled by those family members. Their individual voting rights are summed to find the total family voting rights. In the most cases, the immediate shareholders of a company are themselves corporate entities or investment corporations and other legal entities (e.g., nonprofit foundations). We then identify their owners, the owners of their owners, and so on. For each family group, the total ownership is defined as a group of people related via blood or marriage as the unit of analysis.
 
6
Strictly speaking, the Lerner index is the theoretically valid measure of product market competition. In practice, however, market share, or the Herfindahl concentration index, is widely used because obtaining the necessary data to calculate the Lerner index is difficult (see Goldberg & Knetter, 1999, among others).
 
7
To deal with outliers, we winsorize the data at the 1 and 99 percentiles. That is, the top and bottom 1 percentages are replaced with 99th and 1st percentile values, respectively. Our results are qualitatively the same when outliers are truncated.
 
8
See Meyer (2009) for a discussion of the interpretation of the curvilinear effect.
 
9
We do not make predictions about the relation between internationalization and performance or internationalization and innovation, although the results seem to support both recent and prior work (e.g., Cantwell, 1989, 1992, 1993; Contractor, 2007; Grant et al., 1988; Helpman et al., 2004; Tybout, 2003) that internationalization definitely produces positive effects on firm performance and innovation.
 
10
We thank an anonymous reviewer for pointing this out to us.
 
11
Domestic firms are defined as firms with no foreign sales and no foreign assets.
 
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Metadaten
Titel
The impact of internationalization on performance and innovation: The moderating effects of ownership concentration
verfasst von
Shou-Min Tsao
Guang-Zheng Chen
Publikationsdatum
01.09.2012
Verlag
Springer US
Erschienen in
Asia Pacific Journal of Management / Ausgabe 3/2012
Print ISSN: 0217-4561
Elektronische ISSN: 1572-9958
DOI
https://doi.org/10.1007/s10490-010-9217-5

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