Academic journal article International Journal of Business

Exploring the Relationship between Internationalization Stage, Innovation, and Performance: The Case of Spanish Companies

Academic journal article International Journal of Business

Exploring the Relationship between Internationalization Stage, Innovation, and Performance: The Case of Spanish Companies

Article excerpt

I. INTRODUCTION

In todays' highly competitive economic environment, both innovation and internationalization have become the most commonly recommended recipes, from both scholars and economic development agencies, for companies to survive and grow. Consequently, an increasing amount of government budget is allocated every year to different innovation and export promotion programs and agencies established to assist companies in developing new products and processes, and to commercialize them across borders. However, further research is required to verify empirically the relationship between innovation investment, internationalization and firms' performance. Specifically, previous literature has pointed out the need to enhance the research rigor and scope by considering both product and process innovation (Kylaheiko, 2011), including multidimensional performance outcomes and measuring internationalization by using not only exports, but also the manufacturing capacity or research and development (R&D) abroad (e.g., Kafouros et al., 2008; Golkovo and Valentini, 2011). Other methodological recommendations include the use of contrast groups, with companies from different industries, sizes, or levels of internationalization involvement, and consideration of both managers' perceptions and the firm's objective results in the performance evaluation (e.g., Brouthers and Wilkinson, 2000; Katsikeas et al., 1996).

This study aims to contribute to this area by considering the relationship between internationalization, product and process innovation, and different performance measures. Furthermore, it includes companies from a variety of sectors and internationalization levels, taking into account both exports and foreign direct investment (FDI). This investigation may prove useful to scholars, business managers, and government innovation/export agencies. The former may gain new insights into how the intuitive relationship between innovation and international performance is produced, while agencies may develop a better understanding on the design and implementation of their programs.

II. THEORETICAL BACKGROUND AND HYPOTHESIS

A. The Internationalization Process

In their expansion to other countries, companies follow a process of gradual increases in their involvement. Over time, as they improve their knowledge about exporting and foreign markets, they raise their level of risk and resources committed to the international activities, obtaining in return more control and revenue potential. Hence, companies progress through a series of learning and commitment steps, also known as internationalization stages (this model was first suggested by Johanson and Vahlne in 1977 and is termed the Uppsala model). There has been extensive debate on the validity of this model, challenged by the emergence of the so-called born globals (Knight et al., 2004), or the big-step hypothesis (Pedersen and Shaver, 2011). In this vein, and although some companies may internationalize shortly after their creation, leapfrog stages in the foreign-market establishment chain, or follow a discontinuous process, previous research indicates that the level of export involvement directly affects the company's international decisions and its export performance (Freixanet, 2012; Filipescu et al., 2009; Francis and Collins-Dodd, 2004; Gencturk and Kotabe, 2001). Furthermore, both literature reviews (e.g., Kafouros et al., 2008) and analysis of the innovation process have pointed out that the internationalization stage affects companies' innovation potential, as further discussed in Subsection II.C. As a consequence, this study uses the internationalization stage as the main segmentation criteria.

This work considered and tested other classification variables, including size and industry. Some research has suggested that firm size may moderate the relationship between innovation and performance (e.g., Lichtenberg and Siegel, 1991; Cohen and Klepper, 1996). …

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