2010 Vol. 4 Num. 1 - GCG: Revista de GlobalizaciÃ³n, Competitividad ...

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Degree of Internationalization and performance: Evidence from emerging Brazilian multinational firms 42 The major findings are summarized as follows: • Positive relationship: Higher levels of internationalization are associated with positive returns. Firms deploy their intangible assets to explore market imperfections in foreign countries. • Negative relationship: Higher levels of internationalization are associated with negative returns, mainly when internationalization is done by Greenfield project. This contradictory finding can be explained by Agency Theory, as managers may invest in international projects that destroy value, to be able to capture cash flows from owners. • Inexistent Relationship: Internationalization and performance are not correlated. • S-Curve Hypothesis: Internationalization produces positive returns up to a certain level of investment in international operations. Further from that point, there is an escalation of managerial costs, and the marginal product of internationalization becomes negative. There is a dynamic interplay between costs and benefits of internationalization, so the resulting relationship with performance is a cyclical S-curve. • Inverted U-Curve: Based on the incremental model developed by Uppsala school, this theory postulates that internationalization starts on geographic adjacent countries, where the business environment is more familiar to firms, and returns are prone to be positive. When entering in more complex markets, firms begin to face managerial difficulties that end up compromising returns. Eventually the marginal cost of international expansion will exceed the marginal benefits. The relationship between internationalization and performance would take an inverted U curve. As mentioned before, the vast majority of studies analyzed multinational firms from developed countries. What would be the relationship between internationalization and performance for firms located in an emerging economy, like Brazil? 3. Method 3.1. Sample To understand the effect of internationalization on performance, it is required to analyze how internationalization evolves over time. For that reason, the sampling process was done in ways to include multinationals that have been in foreign markets for some considerable period. The sampling was done by convenience. Six Brazilian multinationals were studied. These are very traditional companies, consolidated in the business market. Companies studied are: GCG GEORGETOWN UNIVERSITY - UNIVERSIA 2010 VOL. 4 NUM. 1 ISSN: 1988-7116
Tiago Loncan and Walter Meucci Nique Table 1. Sample 43 Company Gerdau S.A Sadia S.A Perdigão S.A Embraer S.A Braskem S.A Aracruz Celulose S.A Sector Steel Food Food Aircraft Manufacturing Petrochemicals Paper & Cellulose Data was collected from 2000 to 2007 on annual basis, extracted from Annual and Trimester reports. Since the Brazilian legislation does not force companies to display information regarding international operations on their statements, only public companies could be studied. These companies divulgate information about their international affairs as complementary information to investors. 3.2. Variables and analytic method The main scale being used to measure the degree of internationalization was developed by Sullivan (1994). Internationalization is measured in three basic dimensions: Performance, Structure and Attitude. Performance describes the ratio of foreign sales over total sales (FSTS), Structure compares foreign assets with total assets (FATA), and Attitude refers to the psychic dispersion of international operations (PDIO), reflecting the diversity of markets where firms are operating. Only information to calculate FSTS could be obtained in the financial reports displayed by Brazilian companies. So internationalization was measured by foreign sales over total sales. FSTS = Foreing Sales (or Exports) / Total Sales Performance in internationalization-performance studies have been measured basically on three dimensions too: Accounting ratios (ROA, ROS), efficiency ratios (Operating Costs to Sales) and market ratios (Abnormal returns, Market-to-book, Tobin’s). The variables calculated to measure performance were ROA (Return on Assets) for accounting performance and Tobin’s Q for market performance: ROA = Net Income / Total Assets GCG GEORGETOWN UNIVERSITY - UNIVERSIA 2010 VOL. 4 NUM. 1 ISSN: 1988-7116
Page 1 and 2: Revista cuatrimestral Four-monthly
Page 3 and 4: ordinadas y funcionando armónicame
Page 5 and 6: STAFF CONSEJO CONSULTIVO / ADVISORY
Page 7 and 8: GCG Valenzuela, Arturo, Director, C
Page 9 and 10: GCG 5. BENCHMARKING Y CALIDAD; ELEM
Page 11 and 12: Libros: Dornier, P.P.; Ernst, R.; F
Page 13 and 14: GCG - Each article shall be subject
Page 15 and 16: INDEXACIÓN INDEXING INDEXAÇÃO In
Page 17 and 18: 1. Introducción La plétora de dis
Page 19 and 20: Miguel J. Schloss 3. Las raíces de
Page 21 and 22: Miguel J. Schloss ALTO Soborno Sobo
Page 23 and 24: Miguel J. Schloss Además, en un n
Page 25 and 26: Miguel J. Schloss de los países en
Page 27 and 28: Miguel J. Schloss La conclusión in
Page 29 and 30: Miguel J. Schloss oficiales de trab
Page 31 and 32: Miguel J. Schloss • La existencia
Page 33 and 34: Miguel J. Schloss flexibilidad que
Page 35 and 36: Miguel J. Schloss número creciente
Page 37 and 38: Miguel J. Schloss Bibliografía 37
Page 39 and 40: Miguel J. Schloss 39 GCG GEORGETOWN
Page 41: 1. Background The fast growth of th
Page 45 and 46: Tiago Loncan and Walter Meucci Niqu
Page 53 and 54: 1. Introducción Una de las princip
Page 55 and 56: Veneta Andonova, Yeny E. Rodríguez
Page 63 and 64: 1. Introducción Es un hecho frecue
Page 65 and 66: Lucio Dalía-Mora Nuestra propuesta
Page 67 and 68: Lucio Dalía-Mora • Una fuerte de
Page 69 and 70: Lucio Dalía-Mora 4. La toma de dec
Page 71 and 72: Lucio Dalía-Mora En nuestro país
Page 73 and 74: Lucio Dalía-Mora Durante un period
Page 75 and 76: Lucio Dalía-Mora 6.2. El sistema n
Page 77 and 78: Lucio Dalía-Mora 6.4. Dinámica de
Page 79 and 80: Lucio Dalía-Mora 7. Conclusiones 7
Page 81 and 82: 1. Introducción 81 Las pequeñas y
Page 83 and 84: Lucia Avella-Camarero y Francisco G
Page 91 and 92: 1. Introducción Se pretende determ
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Cristian Salazar C., Pamela Fernán
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1. Introducción La Responsabilidad
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María Iborra-Juan y Ángel Peris-S
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2010 Vol. 4 Num. 1 - GCG: Revista de GlobalizaciÃ³n, Competitividad ...

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