It is generally assumed that the performance of a firm improves with greatermultinationality. Yet recent empirical studies have shown both a U-shapedrelationship (which suggests an initially negative effect of international expansionon performance, before the positive returns of international expansion arerealized) and an inverted-U-shaped relationship (which suggests thatinternational expansion beyond an optimal level is again detrimental toperformance, and results in a negative slope). This paper proposes a new unifiedthree-stage theory of international expansion that incorporates both concepts in asigmoid hypothesis. It then tests this on data from 11 service industries,highlighting the difference between knowledge-based and capital-intensiveservice sectors. Journal of International Business Studies (2003) 34,5–18. doi:10.1057/palgrave.jibs.8400003

In the largest sense, global strategy amounts to (1) the optimal disaggregation or slicing of the firm's value chain into as many constituent pieces as organizationally and economically feasible, followed by (2) decisions as how each slice should be allocated geographically ('offshoring') and organizationally ('outsourcing'). Offshoring and outsourcing are treated as strategies that need to be "simultaneously" analysed, where just 'core' segments of the value chain are retained in-house, while others are optimally dispersed geographically, as well as dispersed over allies and contractors. This amounts to a reconsideration of the nature of the firm that captures the dynamic changes in global configuration and a reconsideration of what constitutes 'core' activities that need to be retained internally. The article proposes a new research agenda that searches for each firm's optimal degree of disaggregation and global dispersion given that further scattering of value chain activities entail benefits as well as increased complexity and costs. Copyright (c) 2010 The Authors. Journal of Management Studies (c) 2010 Blackwell Publishing Ltd and Society for the Advancement of Management Studies.

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