The Effects of Liabilities of Foreignness, Economies of Scale, and Multinationality on Firm Performance — An Information Cost View

Information Costs and Internationalization Performance

“…Extending the view of transaction costs (Hennart, 2011) and using Table 3. Furthermore, the information cost approach is independent of arguments that are not specific to the falling and rising segment of the S-curve, such as economies of scale and liabilities of foreignness (Fisch and Zschoche, 2011). † p < 10%; * p < 5%; ** p < 1%; *** p < 0.1%.…”

“…Accordingly, there is a less accentuated internationalization-performance relationship for large firms than for small firms (Figure 3). Third, we develop the information-cost approach of Fisch and Zschoche (2011) to propose that internationally expanding firms have to wait until they profit from operating in new host countries, whereas internationally contracting firms still profit from the information gathered at a higher degree of internationalization ( Figure 4). Given that a linear influence is statistically similar to an attenuated S-shaped influence, information costs can explain both findings.…”

“…Internationally expanding firms face liabilities of foreignness that reduce firm performance (Contractor et al, 2003;Lu and Beamish, 2004). Fisch and Zschoche (2011) confirm that entering new host countries leads to a temporary decline in performance. Based on Figure 1, we argued that external information costs decrease while internal information costs increase as the spread of international operations rises.…”

“…Above all, industry appears to influence the performance effect of internationalization (Contractor, Kundu, and Hsu, 2003;Lu and Beamish, 2004;Berry, 2006). Adaptation processes are likely to cause performance differences between firms in phases of international expansion and contraction (Fisch and Zschoche, 2011). Adaptation processes are likely to cause performance differences between firms in phases of international expansion and contraction (Fisch and Zschoche, 2011).…”

“…In large firms, economies of scale, market power, and resources access all produce a positive effect, whereas coordination costs, difficulties of transferring intangible assets, and environmental complexity have a negative impact on a firm's performance (Li, 2001;Goerzen and Beamish, 2003;Kumar, 2009). Adaptation processes are likely to cause performance differences between firms in phases of international expansion and contraction (Fisch and Zschoche, 2011). Qian et al (2010) show that location strategies can modify the shape of the internationalization-performance relationship.…”