17-What Is A Multinational Corporation

What is a multinational corporation?
Classifying the degree of rm-level

multinationality
Raj Aggarwal
a,1
, Jenny Berrill
b,2
, Elaine Hutson
c,3
, Colm Kearney
d,
*
a
Department of Finance, College of Business Administration, University of Akron, OH, United States
b
Business School, Trinity College Dublin, Ireland
c
UCD Smurt School of Business, University College Dublin, Ireland
d
Business School and Institute for International Integration Studies, Trinity College Dublin, Ireland
1. Introduction
The terms multinational company (MNC), multinational enterprise and transnational corporation are widely and often
interchangeably used by international business (IB) commentators and scholars. MNCs are traditionally thought of as
successful rms that have grown over many years into large corporations that are international in their operations, vision
and strategies. This was certainly the case during most of the twentieth century because the prevailing technologies in
communications and transport were associated with economies of scale that curtailed the internationalisation of small and
medium-sized enterprises. Recent technological innovations, particularly the advent of the internet, have removed many of
these constraints, and scale is no longer a critical requirement for multinationality. The emergence of international new
venture (INV) rms is testament to this phenomenon. In the modern business environment, rms increasingly operate
across national bordersby exporting and importing raw materials and intermediate or nished products; by employing
foreign capital, people and processes; and by organising, coordinating, and controlling resources globally. While MNCs
International Business Review 20 (2011) 557577
A R T I C L E I N F O
Article history:
Received 20 March 2010
Received in revised form 8 October 2010
Accepted 16 November 2010
Available online 17 December 2010
Key words:
Classication systems
Firm multinationality
Internationalisation theory
A B S T R A C T
The degree of rm-level multinationality is a key dimension that spans all theoretical
frameworks, levels of empirical analysis and domains of investigation in international
business research. There is, however, no agreed approach to dening or measuring rm-
level multinationality. This is reected in inconsistent approaches to sample selection and
empirical testing, and it has curtailed the advancement of the discipline. We propose that
instead of searching for the elusive, all-encompassing denition of an MNC, international
business scholars should instead agree on a classication system for the degree of rm-
level multinationality. We illustrate the advantages of this approach by constructing a
simple classication system that takes into account the rms breadth and depth of
multinational engagements. We illustrate our matrix of rm multinationality by
classifying a novel sample of over 1000 rms from seven countries, and we demonstrate
how it can guide theory development and empirical testing. We also provide examples of
potential future research directions.
2010 Elsevier Ltd. All rights reserved.
* Corresponding author. Tel.: +353 1 896 2688.
E-mail addresses: aggarwa@uakron.edu (R. Aggarwal), jberril@tcd.ie (J. Berrill), elaine.hutson@ucd.ie (E. Hutson), colm.kearney@tcd.ie (C. Kearney).
URL: http://www.elainehutson.ie/, http://www.internationalbusiness.ie/
1
Tel: +1 330 972 7442.
2
Tel.: +353 1 8962632.
3
Tel.: +353 1 7168828; fax: +353 1 2835482.
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doi:10.1016/j.ibusrev.2010.11.004
remain a central focus of IB research, these developments have broadened research agendas and extended the range of rms
that qualify as MNCs.
Although many theoretical and operational denitions of MNC have been proposed, none has become standard.
Researchers have adopted pragmatic approaches to operationally dening the MNC, relying on past usage, data availability
and sub-discipline norms. MNCs have consequently been dened on the basis of characteristics as diverse as the size of the
rmby sales, the proportion of foreign sales or foreign assets, the number of foreign subsidiaries, and the number of foreign
workers. In the internationalisation-performance literature, for example, the ratio of foreign to total sales and the number of
foreign subsidiaries are the most common, but amongst the more unusual, Kwok and Reeb (2000) dened the MNC as a rm
with a foreign assets ratio greater than one percent, and Lecraw (1983) used the FDI level of the rms industry as the
measure of rm-level multinationality.
The absence of an agreed theoretical or operational denition of the MNC is reected in the lack of consistency in how IB
scholars conduct both high-level and domain-specic theory building and testing. This has hindered the ability to compare
and contrast alternative theoretical frameworks, caused confusion in the interpretation of empirical results, and stymied the
emergence of effective replication studies. This in turn has curtailed the process of validating, rening, and rejecting
prevailing theorywhich according to positivist scientic methodology is necessary for advancement of the discipline
(Kuhn, 1962; Popper, 1978). As IB research agendas broaden and intensify, the need for clarity on this issue is becoming
critical. The complex and dynamic IB landscape, characterised by continual change in the structures and strategies of rms as
they evolve, suggests that a denitive theoretical or operational denition is unlikely to emerge. A better alternative would
be to agree on a classication system that encompasses the current forms of MNC while facilitating the inclusion of new
types as they emerge. In this paper, we propose a simple systemfor classifying rms by their degree of multinationality, and
we use this to demonstrate the benets to the discipline of agreeing upon such a system.
Inthe next section, wegroundour perspectivebydocumentingthe widevarietyof approaches todeningthe MNCinall 393
papers that haveusedempirical MNCsamples inthefourteenmost important international business andmanagement journals
between 1987 and 2007: Academy of Management Journal (AMJ), Academy of Management Perspectives (AMP), International
Business Review (IBR), International Marketing Review (IMR), Journal of International Business Studies (JIBS), Journal of
International Management (JIM), Journal of International Marketing (JIMR), Journal of Management (JM), Journal of
Management Studies (JMS), Journal of Marketing (JMR), Journal of Marketing Science (JMS), Journal of World Business (JWB),
Management International Review (MIR), and Strategic Management Journal (SMJ). We also document the many and varied
data sources used in these studies, and we showhowthe multiplicity of approaches to operationally dening the MNC and to
selecting MNC samples has hindered the ability to draw conclusions that can be robustly replicated and veried or refuted.
In Section 3, we construct a simple classication system for the degree of rm-level multinationalitythe matrix of rm
multinationality. We are not advancing this scheme as the optimal system; rather, our purpose is to stimulate debate on the
usefulness of an agreed classication systemthat facilitates a more coherent and consistent epistemology and methodology
in IB research. We illustrate its use by classifying 1015 rms from the G7 countriesBritain, Canada, France, Germany, Italy,
Japan and the United States. Using data on the international distribution of each rms sales and subsidiaries, we show that
our sample rms which include many of the worlds largest range from purely domestic (with no international sales or
subsidiaries) to fully global (with sales and subsidiaries in all regions of the world).
In Section 4 we demonstrate the usefulness of a classication system for the degree of rm-level multinationality in
advancing IB research. We rst show how such a system can provide insights and perspectives to guide high-level theory
building by anchoring important conceptual norms and traditions, highlighting areas that require theoretical renement and
renewal, and stimulating new ideas and directions. We then discuss its usefulness for sample selection and hypotheses
testing. In section 5 we point to future research directions. We illustrate how a classication scheme for rm-level
multinationality can be used to improve empirical testing and to help clarify thinking about several topics in IB, including the
relation between rm-level multinationality and performance, and the regional-global debate. Section 6 contains our
concluding comments.
2. Dening MNCs in IB research
The operational denition
4
of a word or term provides a clear, concise meaning of a concept to guide measurement and
make it amenable to scientic investigation. Operational denitions should be easily quantiable and measurable, and they
should point explicitly to what is being measured and how. In conducting empirical research, operational denitions should
be articulated before compiling samples in order to ensure that researchers collect, use and interpret data consistently.
Borsodi (1967) suggested that operational denitions should be clear, distinct, standard and reproducible. He listed four
canons of denition as adequacysufcient to clarify the meaning; differentiationeliminate confusion of the referent with
other terms by including any attributes that distinguish it; impartialitycharacteristics of similar signicance should be
included with equivalent emphasis; and completenessall important attributes should be included.
4
Other types of denitions include lexical denitions, which describe a concept in simple terms to a wide audience; conceptual denitions, which provide
the meaning of a concept in a way that is compatible with a measurable occurrence; and abstract denitions, which are used when the meaning cannot
easily be measured.
R. Aggarwal et al. / International Business Review 20 (2011) 557577 558
Although IB scholars have long been aware of the complexities involved in arriving at an appropriate denition of the
MNC, the discipline has not succeeded in agreeing on an operational denition that embodies Borsodis (1967) four canons.
The earliest attempt to grapple with the issue of dening the MNC was by Aharoni (1971), who considered three categories of
denition:
Performance denitions, which are based on criteria such as foreign sales and earnings, foreign assets, and the number of
foreign employees.
Structural denitions, such as the number of countries in which the rm operates, the nationality of the rms top
management, and the organisational structure of the rm.
Behavioural denitions, which focus on the extent to which management personnel think internationally about strategic
opportunities.
Aharonis pioneering contribution to dening MNCs has proved to be an insightful and enduring framework for analysis
in research and teaching in IB. Rather than building on or amending earlier denitions, however, IB scholars have tended to
develop an ever-expanding set of alternative denitions. Panel A of Table 1 lists 19 attributes that have been used as
operational denitions to create empirical samples of MNCs (using Aharonis (1971) headings) in the 393 studies published
during the period 1987 to 2007 in AMJ (10 studies), AMP (4), IBR (45), IMR (7), JIBS (133), JIM(25), JIMR (8), JM(6), JMS (8), JMR
(3), JWB (13), MIR (89), and SMJ (42).
5
These studies span a wide range of IB sub-disciplines including culture, government
relations, international nance, international human resources, international management, international marketing,
multinationality and performance, and sourcing strategies and structures. Panel B of Table 1 lists the most popular sources of
data used in the studies.
The rst column in Panel A of Table 1 lists the number of studies that have used the particular attribute as the sole
criterion for operationally dening the MNC; the second presents the number of studies that have used the attribute as one in
a multi-attribute denition; and the third adds these together. The overall total of 419 exceeds the number of studies
because many have used multi-attribute denitions. In total, 264 studies used single attribute and 155 used multi-attribute
denitions. Amongst the single-attribute studies, the number of foreign subsidiaries is the most common (163 studies),
followed by foreign sales (62). In the multi-attribute studies, foreign sales (56) is the most common, with foreign subsidiaries
(47) a close runner-up. Other attributes used to operationally dene MNCs include foreign listings, assets, employees,
income, and taxation. Panel B of Table 1 shows that the most popular data source is the Fortune list which has been used in 55
studies, followed by the Directory of Japanese Overseas Afliates (17), and Compustat (13 studies).
Authors of the multi-attribute studies have in some cases developed rather complex approaches to dening MNCs.
Perlmutter (1969) included four attributes: ownership, organisational structure, the nationality of senior executives, and the
percentage of foreign investment. Sullivan (1994) used Aharonis (1971) performance, structural and attitudinal attributes to
create an index measure of rmmultinationality. More recent efforts to construct indexes of multinationality include Gomes
and Ramaswamy (1999) and Asmussen (2009). There have been several critiques of the index approach to dening MNC.
Ramaswamy, Kroeck, and Renforth (1996), for example, argued that important information is lost with the aggregation
involved in creating an index, and Allen and Pantzalis (1996) showed that the equal weighting of Sullivans (1994) attributes
is questionable.
With the multiplicity of approaches to operationally dening MNCs that we have documented here, it is not surprising
that the outcome has been inconsistent and even contradictory ndings between studieswhich could be largely avoided if
the IB discipline were to agree on a classication system for the degree of rm-level multinationality. We illustrate this by
briey describing the ndings of some of the most well-cited empirical papers on two of the most important topics in IB
research: rst, the internationalisation-performance relation, and second, the question of whether investing in home-based
MNCs provides the benets of international portfolio diversication. For each question, we rst showhowthe issue remains
unsettled; and by detailing the sample selection process in two or three studies, we illustrate howdifferent the samples can
be in the empirical IB literature.
2.1. Does rm-level multinationality affect performance?
The question of whether and to what extent the degree of multinationality adds to rm value is unsettled. Researchers
initially sought evidence on a positive linear relation, and mixed results led to the investigation of various possible nonlinear
relations, such as quadratic, U-shaped, and horizontal S-shaped. Douglas and Craig (1983), Lecraw (1983), Grant (1987) and
Brouthers, Werner, and Matulich (2000) found that the degree of multinationality is associated with rising protability. In
contrast, Mishra and Gobeli (1998) found that greater multinationality per se does not deliver greater value; Gomes and
Ramaswamy (1999) found that greater multinationality brings performance benets up to a point beyond which they cease;
and Kotabe, Srinivasan, and Aulakh (2002) found that the benets of multinationality are moderated by R&D and marketing
capabilities. Grant (1987) created a MNC sample of 304 British-owned manufacturing rms from the Times 500 list of
5
We also examined the Journal of Marketing Science, but found no studies that had compiled MNC samples. Our JIBS list includes studies dating back to
1970.
Britains largest rms that had at least 10 percent of their production abroad. Kotabe et al.s (2002) sample comprised 49 US-
based rms, and the extent of multinationality was measured by the ratio of foreign to total income.
2.2. Do MNCs provide the benets of international portfolio diversication?
Theory and intuition suggest that investing in locally-listed MNCs should provide international portfolio diversication
benets. The ndings on this question are split down the middle: Hughes, Logue, and Sweeney (1975), Agmon and Lessard
(1977), Mikhail and Shawky (1979), Logue (1982), Errunza, Hogan, and Hung (1999), Cai and Warnock (2004) and Berrill and
Kearney (2010) found that investing in domestically-listed MNCs yields international diversication benets, but Jacquillat
and Solnik (1978), Senchak and Beedles (1980), Brewer (1981), Fatemi (1984), Michel and Shaked (1986), Mathur, Singh, and
Gleason (2001) and Rowland and Tesar (2004) found no evidence of international diversication benets.
Table 1
Dening MNCs in IB research.
Panel A: Variables used to operationally dene MNCs
Single-attribute Multi-attribute Total
Performance denitions
Subsidiaries 163 47 210
Sales 62 56 118
Foreign assets 2 6 8
Foreign production 3 4 7
Foreign joint ventures 3 2 5
Foreign income 1 3 4
International transactions 2 1 3
Foreign investments 1 2 3
Mergers and acquisitions 1 0 1
Structural denitions
Foreign employees 1 9 10
Foreign exchange listing 1 5 6
Industry details 1 3 4
Foreign equity 2 2 4
Foreign taxation 0 2 2
Global accounts 0 1 1
Behavioural denitions
Research and development 2 2 4
International marketing 0 2 2
World mandates 0 1 1
Patents 1 0 1
Unclear 18 7 25
Total 264 155 419
Panel B: Data sources used to classify MNCs
The Fortune List 55
Directory of Japanese Overseas Afliates 17
Standard and Poors Compustat 13
Dun and Bradstreet International Database 12
International Directory of Corporate Afliations 12
Moodys Directory of Corporate Afliations 9
The Forbes List 8
Corporate Families and International Afliates 7
Individual Stock Exchange Publications 7
Directory of American Firms Operating in Foreign Countries 6
Directory of International Afliations 6
World Directory of Multinatinal Enterprises 5
US Bureau of Economic Analysis 4
Who Owns Whom 4
The Financial Times Global 500 List 3
Centre for Research on Security Prices Database 2
Directory of Foreign Invested Enterprises 2
Electronics Manufacturing Firms in Asia 2
Global Business 1000 List 2
Notes. Panel A lists 17 attributes that have been used to create operational denitions of MNCs in 393 studies published during 1987 to 2007 in the Academy
of Management Journal (10 studies), Academy of Management Perspectives (4), International Business Review (45), International Marketing Review (7),
Journal of International Business Studies (133 studies, from1970 to 2007), Journal of International Management (25), Journal of International Marketing (8),
Journal of Management (6), Journal of Management Studies (8), Journal of Marketing (3), Journal of Marketing Science (0), Journal of World Business (13),
Management International Review (89), and Strategic Management Journal (42). The total of 419 for this column exceeds the number of studies because
many studies used multi-attribute denitions. Panel B lists 19 data sources that have been used by a minimum of two of these studies.
A close examination of a couple of these studies reveals the diversity of their samples. Errunza et al. (1999) used the 30
largest US companies in the Fortune 100 list, making the implicit assumption that large rms must be multinational. It is
likely, instead, that their sample includes rms with a broad range of multinationality, from purely domestic to deeply
global. Michel and Shaked (1986) examined Fortune 500 rms in the manufacturing sector, classifying them as MNCs if at
least 20 percent of their sales were foreign and if they had direct investment in at least 6 countries. Domestic rms were
dened as rms with less than 10 percent of sales, prots and assets abroad.
As this brief overview shows, the diversity in approaches to operationally dening MNCs and to compiling MNC samples
limits comparison across studies, and probably explains a large proportion of the disparity in their ndings. The absence of an
agreed approach to operationally dening or measuring the degree of rm-level multinationality has led to highly dissimilar
rms being included in samples labelled MNC. This has resulted in disparate ndings across similar studies, and by making it
hard for researchers to conrmor contradict previous ndings, has stymied the development of the discipline. The difculties
associatedwithMNCdenitionwere recognisedmore than40years agobyPerlmutter (1969, p. 11) whoobservedthat: Part of
the difcultyindeningthe degree of multinationalitycomes fromthe varietyof parameters along whicha rmdoingbusiness
overseas can be described . . . Another early articulation of the problem was by Sanden and Vahlne (1974, p. 92), who argued
that There is, of course, no sharp demarcation line between multinational and national rms. The essence of our argument is
that given the complexity of the MNC, rather than searching for a single acceptable denition, a better approach would be to
developa classicationsystemfor the degree of rm-level multinationality that is sufcientlyexible toencompass the known
forms of international enterprise while allowing for new forms that may emerge in the future.
3. Classifying rms by multinationality
Classication systems are widely used in theoretical and empirical analysis in many disciplines in the arts, humanities,
physical sciences and social sciences. By focusing on agreed sets of characteristic dimensions, classication systems condense
and organise information to facilitate comparison and contrast between object types within and across populations. Many are
well known, such as the Linnaeus hierarchical classication of plants and animals, the periodic table of chemical elements and
the Dewey library classication system. In business and management, readers will be familiar with the various industry
classication systems (such as the Industry Classication Benchmark (ICB), the North American Industry Classication System
(NAICS), and the Standard International Trade Classication (SITC)), and the Journal of Economic Literature (JEL) system that
organises the business disciplines into 20 main categories. Other well-known business-related classication schemes are
Hambricks (1984) classication of strategy, Pavitts (1984) technical change, McGee and Thomas (1986) strategic groups,
Greenbergs(1987) organisational structure, WeatherfordandBodilys (1992) asset yieldmanagement, Miller andRoths(1994)
manufacturing strategies, Archibugi and Michies (1995) technology globalisation, Law, Wong, and Mobeleys (1998)
multidimensional constructs, Earls(2001) knowledgemanagement, andMarks, Mathieu, andZaccaros(2001) teamprocesses.
6
Althoughthereis nogenerallyagreedclassicationsystemfor the degreeof rm-level multinationality, a number of authors
have developed high-level typologies of MNCs. Among the best-known and most highly cited of these are Perlmutters (1969)
threefold typology of managerial mindsets as home country-oriented (ethnocentric), host country-oriented (polycentric), and
world-oriented (geocentric); Cavess (1982) threefold typology of multiplant MNCs as horizontal, vertical and diversied;
Bartlett and Ghoshals (1989) fourfold typology of MNC organisational structure as multinational, international, transnational
andglobal; Dunnings (1993) fourfoldtypologyof the rationale for FDI as market-seeking, efciency-seeking, resource-seeking,
andstrategic asset-seeking; andRugmans (2003) fourfoldtypologyof MNCstrategic orientationas home-regional, bi-regional,
host-regional and global. Others include Hill, Hwang, and Kims (1990) foreign market entry modes, Hennarts (1991) control
modes, and Morrison and Roths (1992) industry strategies. Harzing (2000) reviewed rm-level typologies inIBandfoundthat
they relate to variables such as control, human resource practices, organisation design, and strategy and subsidiary behaviour.
The difference between typologies and classication schemes has received considerable attention in the business and
management literature. Doti and Glick (1994) argued that the terms are often confused, and in the process they provided a
good denition of typology:
. . ..a researcher might reasonably conclude that organizational typologies are atheoretical devices that are mainly
useful for categorization.. such a conclusion would be incorrect . . . typologies are complex theoretical statements that
should be subjected to quantitative modeling and rigorous empirical testing . . .. typologies identify multiple ideal
types, each of which represents a unique combination of the organizational attributes that are believed to determine
the relevant outcome(s). (pp. 231-232).
A classication scheme is dened by Chrisman, Hofer, and Boulton (1988) as:
. . .. a system or scheme in order for researchers to arrange entities into taxa [groups or categories] based on their
similarities, differences, and relationships to one another as determined by or inferred from their most fundamental
characteristics. (p. 415).
6
The inuence and usefulness of these contributions is amply demonstrated by their exceptionally highcitation rates. At the time of writing, these papers
have more than 250 citations each and together have been cited more than 4800 times on Googles Advanced Scholar search engine.
Classication schemes categorise phenomena into mutually exclusive and exhaustive groups using discrete decision
rules (Doti & Glick, 1994), and their purpose is to guide theoretical and empirical research. In contrast, typologies are
complex theories that can and should be tested empirically. Classication schemes can in fact be used as a framework for the
empirical testing of typologies. We discuss how our classication scheme could be used to test some of the best-known IB
typologies in section 4.
3.1. A classication system for rm-level multinationality
Our objective in developing a classication systemfor the degree of rm-level multinationality is to create a scheme that
can encompass the important dimensions of multinationality while at the same time being intuitive and easy to use. This
involves a tradeoff between accuracy and simplicity. A reasonably simple design is critical because multidimensional
classication schemes blow up when dimensions are added.
7
Although classications schemes are not theoretical devices, theory is an important element in guiding the development
of such systems. Indeed, the literature on organisational classication systems (Carper &Snizek, 1980; Chrisman et al., 1988;
McKelvey, 1975, 1978; Rich, 1992) has long recognised that successful systems should capture key characteristics by
drawing on theory while taking into account empirical and practical evidence. In designing a classication system, therefore,
the rst decision is to choose the key dening characteristics of the entities to be classied. The second is to determine the
classication systems categories. Chrisman et al. (1988, p. 416) describe ve necessary attributes of the categories: they
should be mutually exclusive; internally homogeneous; collectively exhaustive (every organisation must belong to an
existing group); stable (in the sense that the groupings should be xed over time, and not subject to change with new or
different empirical tests or data sets); and relevantly named (consistent with common usage to ensure effective
communication between and within the academic and business communities). Keeping in mind the importance of
simplicity, and informed by Chrisman et al.s (1988) necessary attributes, our classication scheme for rm-level
multinationality captures two dening characteristics: breadththe extent of geographical spread of operations, and depth
the degree of engagement with and exposure to each geographical unit.
3.2. Breadth
We measure breadth as the extent of geographic spread using four broad categories: domestic, regional, trans-
regional and global. To calibrate this, we divide the world into six regions based on the inhabited continents: Africa, Asia,
Europe, North and Central America, Oceania, and South America. Asia includes the Middle East and Turkey, and Europe
includes countries as far east as Armenia, Azerbaijan, Belarus, Ukraine and the Russian Federation. North and Central
America includes Mexico and the other countries of Central America and the Caribbean as well as Canada and the United
States. Oceania comprises Australia, New Zealand and the Pacic islands. Table 2 provides a list of the countries in each
region.
We use continent-based regions for two important reasons. First, by encompassing all countries of the world, it satises
Chrisman et al.s (1988) third necessary attributethat the groupings should be collectively exhaustive. Our delineation is
more inclusive than many of the regional groupings that have been seen in the IB literature. For example, the triad of Ohmae
(1985) the EU, Japan and the United States was advocated on the basis that these regions constituted the worlds three
largest markets and that most large rms were headquartered there. This was extended by Rugman (2003) and Rugman and
Verbeke (2004) to include the expanded EU, Asia and NAFTA, but it still excludes many countries and whole continents
Africa, South America, and Australasia.
8
Our continent-based regions provide a framework for examining the activities of
triad-headquartered rms beyond the triad (Flores & Aguilera, 2007), and of rms headquartered in non-triad emerging
economies that internationalise into triad regions and elsewhere (Aggarwal & Agmon, 1990; Aulakh, 2007). Second, our
regions are dened along geographic rather than political lines, because the political map can change over timeas
exemplied by the obsolete regions EFTA and COMECON, used by Hirsch and Lev (1971) and Miller and Pras (1979),
respectively. Our classication scheme therefore satises Chrisman et al.s (1988) fourth necessary attributethat the
groupings are stable and not subject to alteration when empirical or other circumstances change. It therefore facilitates the
analysis of changing patterns in international business over time. This is increasingly important because the geographical
distribution of production, investment and consumption are becoming more diverse and dynamic (Dunning, 2009). The
emergence of Eastern Europe from communism in the early 1990s, the development and growth of China and India during
the last two decades, and more recent trends such as the rise of the South American economies and increasing ows of FDI
into Africa and from the Middle East are now on the research agendas of IB scholars.
7
Dess, Newport, and Rasheed (1993) point out that as the number of dimensions of a construct increases arithmetically, the number of combinations
increases geometrically. As we see in the next section, a 2 4 classication matrix of multinationality yields 16 combinations.
8
The triad excludes 155 countries, and these are mainly emerging economies in Asia, Eastern Europe, the Middle East, South America and Africa. The
IMFs and the World Banks list of the largest 20 economies measured by GDP in2008 includes Brazil, China, India and Russia (the so-called BRICs) along with
Indonesia and Mexico. These are all outside the triad, as are many of the worlds largest 50 economiesincluding such countries as Argentina, Nigeria,
Poland, Saudi Arabia and Turkey.
3.3. Depth
We measure the depth of market engagement on the basis of the commitments and contractual arrangements that rms
engage in, and the resulting levels of control they obtain together with the risks they face. Depth ranges from the shallow
engagement with international markets associated with exports and imports, to licensing and franchising, operating foreign
ofces, forming alliances and joint ventures, through to the commitment of FDIwhich generally involves a deeper
engagement with foreign markets and higher exposures to foreign business, economic and political risks than say exporting
or licensing.
In dening depth in this way, we are following several theoretical studies from the entry mode literature,
9
which place
the various entry modes on a scale fromlowengagement to high engagement. Anderson and Gatignon (1986), for example,
dened 17 entry modes fromsmall shareholder to wholly-owned subsidiary (WOS) based on the tradeoff between resource
commitment and control. Erramilli and Rao (1990) developed a 9-point level of involvement scale with licensing and
franchising at the lowest end of the scale and WOS at the other. Hill et al. (1990) typology places entry modes on a scale based
on the extent of resource commitment, control and dissemination risk. As we will shortly illustrate, researchers can use one
or more of the depth dimensions, depending on the issue being studied and the availability of data.
3.4. The matrix of rm multinationality
Combining the breadth and depth dimensions, we create our simple matrix of rm multinationality. A rm whose
business activities take place entirely within its home country is dened as domestic (D), and a rmwith business activities
in the region in which it is headquartered is referred to as regional (R). R can be further delineated into three categories: R1
(less than one-third of the countries in the region), R2 (between one-third and two-thirds) and R3 (more than two-thirds).
For example, a British rmthat is headquartered in London and operates in one or two countries in the rest of Europe would
be classied as R1. If, however, it has operations throughout Europe (and not elsewhere), it would be classied as R3. If a rm
conducts business in more than one region (but not fully globally) it is dened as trans-regional (T), and this category is
further subdivided into T2 (two regions), T3 (three regions), T4 (four regions) and T5 (ve regions). We classify rms as
global (G) if they conduct business in all six regions. Because our classication scheme includes the full range of geographic
spread, it satises Chrisman et al.s (1988) third necessary attribute: that the categories should be collectively exhaustive.
Our scheme is inclusive of all rmsincluding purely domestic rms.
For ease of exposition, we initially work with a basic version of our classication scheme containing the four broad
breadth dimensions: domestic (D), regional (R), trans-regional (T) and global (G). We demonstrate and illustrate the system
Table 2
Country constituents of each region.
Africa (53):
Algeria, Angola, Benin, Botswana, Burkina, Burundi, Cameroon, Cape Verde, Central African Republic, Chad, Comoros, Congo, Congo (Dem. Rep.),
Djibouti, Egypt, Equatorial Guinea, Eritrea, Ethiopia, Gabon, Gambia, Ghana, Guinea, Guinea-Bissau, Ivory Coast, Kenya, Lesotho, Liberia, Libya,
Madagascar, Malawi, Mali, Mauritania, Mauritius, Morocco, Mozambique, Namibia, Niger, Nigeria, Rwanda, Sao Tome and Principe, Senegal,
Seychelles, Sierra Leone, Somalia, South Africa, Sudan, Swaziland, Tanzania, Togo, Tunisia, Uganda, Zambia, Zimbabwe.
Asia (44):
Afghanistan, Bahrain, Bangladesh, Bhutan, Brunei, Burma, Cambodia, China, East Timor, India, Indonesia, Iran, Iraq, Israel, Japan, Jordan,
Kazakhstan, Korea, (north), Korea (south), Kuwait, Kyrgyzstan, Laos, Lebanon, Malaysia, Maldives, Mongolia, Nepal, Oman, Pakistan,
Philippines, Qatar, Saudi Arabia, Singapore, Sri Lanka, Syria, Tajikistan, Thailand, Turkey, Turkmenistan, United Arab Emirates, Uzbekistan,
Vietnam, Yemen.
Europe (47):
Albania, Andorra, Armenia, Austria, Azerbaijan, Belarus, Belgium, Bosnia and Herzegovina, Bulgaria, Croatia, Cyprus, Czech Republic, Denmark,
Estonia, Finland, France, Georgia, Germany, Greece, Hungary, Iceland, Ireland, Italy, Latvia, Liechtenstein, Lithuania, Luxembourg, Macedonia,
Malta, Moldova, Monaco, Montenegro, Netherlands, Norway, Poland, Portugal, Romania, Russian Federation, San Marino, Serbia, Slovakia,
Slovenia, Spain, Sweden, Switzerland, Ukraine, United Kingdom, Vatican City.
North and Central America (23):
Antigua & Barbuda, Bahamas, Barbados, Belize, Canada, Costa Rica, Cuba, Dominica, Dominican Rep., El Salvador, Grenada, Guatemala, Haiti,
Honduras, Jamaica, Mexico, Nicaragua, Panama, St. Kitts and Nevis, St. Lucia, St. Vincent and the Grenadines, Trinidad &, Tobago, United States.
Oceania (14):
Australia, Fiji, Kiribati, Marshall Islands, Micronesia, Nauru, New Zealand, Palau, Papua New Guinea, Samoa, Solomon Islands, Tonga, Tuvalu,
Vanuatu.
South America (12):
Argentina, Bolivia, Brazil, Chile, Colombia, Ecuador, Guyana, Paraguay, Peru, Suriname, Uruguay, Venezuela.
Notes: This table places the worlds 193 countries into our 6 continent-based regions. The list includes all countries that are recognised by the
United Nations, and excludes dependencies and territories.
9
Brouthers and Hennart (2007) and Canabal and White (2008) provide reviews of research on foreign entry mode.
using two depth dimensionstrading (sales) (S) and investment in subsidiaries (I). Putting these together, we derive our 2
4 matrix of rm multinationality shown below, in which the rst letter refers to the depth, and the second to the breadth of
multinationality. This allows us to classify rms into categories ranging frompurely domestic (SD-ID) that do not export and
have no subsidiaries abroad, to deeply global rms (SG-IG) that have sales and subsidiaries in all regions of the world. In
between these extremes, rms can be classied into groups depending on the combination of their depth and breadth. Table
3 describes three types of regional rm (numbered 24), ve types of trans-regional rm (59) and seven types of global
corporation (1016).
Depth of engagement Breadth of geographical spread
Domestic Regional Trans-regional Global
Sales SD SR ST SG
Investments (subsidiaries) ID IR IT IG
A simple example illustrates the intuition behind our classication scheme. Two hypothetical Canadian rms, Maple Inc
and Rocky Inc, export their products to the United States and Europe. Maples goods are manufactured by a number of
subsidiaries in Canada so it is a ST-ID rm with trans-regional sales and domestic subsidiaries. Rocky is a ST-IT rm with
trans-regional sales and subsidiaries because its products are manufactured by subsidiaries in Brazil and Thailand. If these
two rms were classied by sales the most common approach to operationally dening MNCs in the IB literature they
would be deemed the same. Clearly, however, these rms face dissimilar challenges, costs and risks.
Our matrix of rm multinationality acknowledges location as a pivotal dimension of multinationality. Location has long
played a key part in IB theory and strategy (Dunning, 1977; Ghemawat, 2003, 2005; Lo sch, 1954; Martin, 1999; Ricart,
Enright, Ghemawat, Hart, & Khanna, 2004; Ronen & Shenkar, 1985; Weber, 1929). The sticky places within slippery space
described by Markusan (1996) and Floridas (2005) spiky world provide the basis for international strategy that is lacking in
the at world of Friedman (2005). More recently, Dunning (2009) notes that although lower trade costs and barriers have
seen greater geographical dispersion between the location (L) and ownership (O) of production, more reliance on knowledge
and other intangible assets has led to greater concentration in specic clusters, countries and regions. Governments now
compete vigorously for FDI (Barry & Kearney, 2006; Gertler, 2001; Wheeler & Mody, 1992), and the more successful of these
have created innovative regions and clusters like the London square mile, Hydrabad, and Silicon Valley (Casper, 2007; Kenny,
2000; Teece, 2000; Whitley, 2009)that are prime examples of sticky places between wide-open spaces that attract MNCs
at different depths of market engagement.
Table 3
Classifying rms by multinationality: 16 rm types.
Category Symbol Description Count %
Purely domestic rms
1 SD-ID Domestic sales and subsidiaries 107 11
Regional rms
2 SR-ID Regional sales, domestic subsidiaries 14 1
3 SD-IR Domestic sales, regional subsidiaries 28 3
4 SR-IR Regional sales and subsidiaries 14 1
Total regional 56 5
Trans-regional rms
5 ST-ID Trans-regional sales, domestic subsidiaries 17 2
6 ST-IR Trans-regional sales, regional subsidiaries 17 2
7 SD-IT Domestic sales, trans-regional subsidiaries 73 7
8 SR-IT Regional sales, trans-regional subsidiaries 41 4
9 ST-IT Trans-regional sales and subsidiaries 538 53
Total trans-regional 686 68
Global rms
10 SG-ID Global sales, domestic subsidiaries 2 0
11 SG-IR Global sales, regional subsidiaries 0 0
12 SG-IT Global sales, trans-regional subsidiaries 53 5
13 SD-IG Domestic sales, global subsidiaries 4 0
14 SR-IG Regional sales, global subsidiaries 4 0
15 ST-IG Trans-regional sales, global subsidiaries 87 9
16 SG-IG Global sales and investments 16 2
Total global 166 16
Notes. This table expands the matrix of multinationality into 16 rm types: purely domestic rms (SD-ID) (number 1), three categories of regional rm
(numbered 24), ve categories of trans-regional rm (59), and seven categories of global rm (1016). The two columns on the right apply the
classication system to the 1015 rms from Canada (44), France (91), Germany (91), Italy (107), Japan (156), UK (81) and USA (453), for which both
international sales and subsidiary data are available.
In addition to location, our classication scheme acknowledges distance as an important dimension of rm-level
multinationality (Nachum & Zaheer, 2005). The gravity model has been applied to study patterns of rm-level
internationalisation, modes of foreign market entry, international strategy, and the effects of culture on human resources,
management and marketing (Ghemawat, 2001; Leamer & Storper, 2001; Slangen, 2006; Tihanyi, Grifth, & Russell, 2005).
While the locational choice and multinationality-performance literatures often allude to many factors other than purely
geographical distancecultural, economic and psychic, for examplegeographical distance can be seen as a reasonable
approximation of these. In their review of country groupings, Aguilera, Flores, and Vaaler (2007) argued that physical
contiguity the most straightforward approach to dening regions is also the most appropriate because geographical
proximity correlates closely with other properties such as culture. Consistent with this, Goerzon and Beamish (2003) found
that MNCs international asset dispersion (their purely geographical measure of international scope) dominates the political
and cultural diversity of MNCs foreign operations. Although our systemdoes not explicitly include any metric for distance, it
implicitly acknowledges that activities that are trans-regional or global will generally be more distant from the
internationalising rms home base than domestic or home regional activities.
3.5. Illustration of the classication scheme
To illustrate howthe matrix of rmmultinationality can work in practice, and to clarify howit differs froma typology, we
construct a sample of rms from Canada, France, Germany, Italy, Japan, the United Kingdom and the United States that are
the constituent rms of these countries main stock market indexes: the TSX 60, the SBF 120, the HDAX 110, the MIB-SGI 174,
the Nikkei 225, the FTSE 100 and the S&P 500. We compiled this list from the websites of each countrys stock exchange in
2006. The geographical spread of subsidiaries was obtained from Dun and Bradstreets Who Owns Whom 2005/06, which
species the location by country of each subsidiary. We obtained data on the geographic spread of each rms sales from
Worldscope, which is drawn from company accounts for the year ending 31 December 2005. Of our initial data set of 1289
rms, data on sales and subsidiaries were available for 1143 and 1155 companies, respectively.
As well as being much larger than the Fortune 500 (which is the most commonly-used data source in research on MNCs, as
detailed in Panel B of Table 1), our data set has more non-US rms and it includes smaller rms froma more eclectic range of
industries. Our sample comprises rms in 10 broad ICB industry categories: industrials (237 rms), nancials (231),
consumer services (195), consumer goods (174), technology (109), basic materials (106), health care (88), oil and gas (65),
utilities (62) and telecommunications (22). The mean incorporation date is 1922, with rm age ranging from more than 5
centuries (Banca Monte dei Paschi dates from1472) to less than 5 years. The largest rmis Exxon Mobil, and average size by
sales is US$14 billion.
The two right-hand columns in Table 3 show the number and percentage of our sample rms in each multinationality
category for the 1015 rms for which both sales and subsidiary data are available. Our classication scheme does not impose
thresholds; if a rmhas any sales or a minimumof one subsidiary in a particular country or region, it is considered to have a
presence there. It is important not to use thresholds for two main reasons. First, the average rm in a large and relatively
closed country will usually have a smaller proportion of sales and assets abroad than a similar rm in a more open country
(Eden, 2008; Glaum&Oesterle, 2007). Using thresholds will therefore result in a large number of rms fromclosed economy
countries being excluded from the sample, resulting in selection bias. Second, countries vary greatly in their market size,
wealth and price levels, rendering sales thresholds inappropriate. For example, if a rm from a developed country sells its
products in Africa, that market will most likely constitute a small fraction of its overall sales. This does not mean, however,
that the rm considers its presence in Africa irrelevant to its operations and strategies.
There are 107 (11 percent of the sample) domestic SD-ID rms with no foreign sales or subsidiaries, and 56 (5 percent)
regional rms. Trans-regional rms are the most numerous; 686 or 68 percent fall into this category. Most of these (53
percent) are ST-IT rms that are trans-regional in both sales and subsidiaries. Lastly, 16 percent of the sample rms have a
global reach in either their sales or investments. The fact that some of our categories are rather underpopulated there are
few regional rms, for example, and few rms are categorised as types 10, 11, 13 and 14 does not imply that they are
redundant. Classifying a different set of rms would undoubtedly result in a different distribution of rm types. The key
point is that our matrix of rm multinationality is easy to implement and can be applied to different samples of rms.
Table 4 provides comprehensive details on the largest 100 rms
10
in our G7 sample. We rank the rms by size (column 1),
and provide the company name and industry sector (2 and 3), the date of formation (4), the size measured by sales in US$
billions (5), and the country in which the rm is headquartered (column 6). In columns (7) and (8) we categorise the rms
using our 10-point breadth dimension (D, R1, R2, R3, T1, T2, T3, T4, T5 or G) for the sales and subsidiaries depth dimensions,
respectively; and in column 9 we categorise each rmas one of the 16 rm types as described in Table 3. For the 100 largest
listed rms in the G7 countries, there are relatively few at either end of the multinationality spectrum: 7 category 1 (SD-ID)
purely domestic rms, and 4 category 16 (SG-IG) fully global MNCs. The most common rmtype is category 9 (ST-IT) (trans-
regional sales and trans-regional investments) with 40 constituent rms, and there are 38 category 15 (ST-IG) rms with
trans-regional sales and global investments.
10
The classications for all of the sample G7 rms are available on request from the authors.
Table 4
The 100 largest G7 rms.
(1) (2) (3) (4) (5) (6) (7) (8) (9)
Rank Firm Industry Age Size Location Sales Subs Category
1 Exxon Mobil Oil & Gas 1870 328.21 US T2 G 15 ST-IG
2 Wal-Mart Consumer Goods 1962 312.43 US T2 T4 9 ST-IT
3 BP Oil & Gas 1908 250.32 Britain T3 G 15 ST-IG
4 General Motors Consumer Services 1908 192.60 US T4 G 15 ST-IG
5 Toyota Motors Consumer Goods 1937 191.31 Japan T4 G 15 ST-IG
6 Daimlerchrysler Consumer Goods 1903 186.37 Germany T5 G 15 ST-IG
7 Chevron Oil & Gas 1879 184.92 US T2 T5 9 ST-IT
8 Ford Motor Consumer Services 1903 177.09 US T3 G 15 ST-IG
9 Conocophillips Oil & Gas 1875 162.41 US T3 T4 9 ST-IT
10 Total Oil & Gas 1924 152.58 France T5 T2 9 ST-IT
11 General Electric Industrials 1879 148.02 US T5 G 15 ST-IG
12 Citigroup Financials 1812 120.28 US T3 G 15 ST-IG
13 Volkswagen Consumer Goods 1937 118.55 Germany G G 16 SG-IG
14 Allianz Financials 1890 115.97 Germany T4 G 15 ST-IG
15 AIG Financials 1919 109.29 US T3 T5 9 ST-IT
16 AXA Financials 1817 106.75 France T4 T5 9 ST-IT
17 Generali Financials 1831 95.69 Italy Rl D 2 SR-ID
18 Siemens Industrials 1847 93.88 Germany T5 G 15 ST-IG
19 Hsbc Hldgs Financials 1865 92.84 Britain T4 G 15 ST-IG
20 Carrefour Consumer Services 1957 92.70 France T4 T4 9 ST-IT
21 ENI Oil & Gas 1953 91.68 Italy G T5 12 SG-IT
22 IBM Technology 1888 91.13 US T3 G 15 ST-IG
23 Honda Motor Consumer Goods 1948 90.11 Japan T4 G 15 ST-IG
24 Mckesson Health Care 1833 88.05 US T2 T3 9 ST-IT
25 Hewlett-Packard Technology 1939 86.70 US T2 T5 9 ST-IT
26 Hitachi Industrials 1910 86.07 Japan T4 G 15 ST-IG
27 Nissan Motors Consumer Goods 1932 85.74 Japan T4 T5 9 ST-IT
28 Bank Of America Financials 1928 85.06 US T5 T5 9 ST-IT
29 Valero Energy Oil & Gas 1980 82.16 US T2 Rl 6 ST-IR
30 BNP Paribas Financials 1966 81.98 France G G 16 SG-IG
31 Credit Agricole Financials 1894 81.62 France G D 10 SG-ID
32 Home Depot Consumer Services 1978 81.51 US Rl T2 8 SR-IT
33 Cardinal Health Health Care 1971 81.36 US T2 T5 9 ST-IT
34 JPMorgan Chase Financials 1799 79.90 US G G 16 SG-IG
35 HBOS Financials 1695 76.60 Britain T2 T4 9 ST-IT
36 Deutsche Bank Financials 1870 75.82 Germany T5 G 15 ST-IG
37 Verizon Telecommunications 1885 75.11 US T2 T2 9 ST-IT
38 Prudential Financials 1848 74.83 Britain T3 G 15 ST-IG
39 Deutsche Telekom Telecommunications 1871 74.17 Germany T3 T5 9 ST-IT
40 Aviva Financials 1696 72.75 Britain T3 T3 9 ST-IT
41 RBOS Financials 1727 71.89 Britain T3 T4 9 ST-IT
42 Tesco Consumer Services 1919 71.79 Britain T2 T2 9 ST-IT
43 Peugeot Consumer Goods 1882 70.02 France T3 T5 9 ST-IT
44 Metro Consumer Services 1964 69.34 Germany T3 T3 9 ST-IT
45 Altria Group Consumer Goods 1860 68.92 US T3 G 15 ST-IG
46 Procter & Gamble Consumer Goods 1837 68.22 US T2 G 15 ST-IG
47 Societe Generate Financials 1864 64.53 France G G 16 SG-IG
48 EOn Utilities 1929 64.52 Germany T3 T4 9 ST-IT
49 EDF Utilities 1946 63.54 France T2 T2 9 ST-IT
50 France Telecom Telecommunications 1988 61.02 France T2 G 15 ST-IG
51 Kroger Consumer Goods 1883 60.55 US D D 1 SD-ID
52 Muenchener Ruck Financials 1880 58.91 Germany T5 T4 9 ST-IT
53 Marathon Oil Oil & Gas 1887 58.60 US T3 T2 9 ST-IT
54 Fiat Consumer Goods 1899 57.92 Italy T4 G 15 ST-IG
55 Toshiba Industrials 1875 57.69 Japan T4 T5 9 ST-IT
56 Legal & General Financials 1836 56.39 Britain T2 T2 9 ST-IT
57 Dell Technology 1984 55.91 US T4 T5 9 ST-IT
58 Nippon Oil Oil & Gas 1888 55.64 Japan T4 T4 9 ST-IT
59 Deutsche Post Industrials 1490 55.49 Germany T5 G 15 ST-IG
60 Lloyds TSB Financials 1765 55.47 Britain D T4 7 SD-IT
61 Boeing Industrials 1916 54.84 US G T4 12 SG-IT
62 Amerisourcebergen Health Care 1907 54.58 US D D 1 SD-ID
63 Vodafone Group Telecommunications 1983 53.40 Britain T3 T5 9 ST-IT
64 Basf Basic Materials 1865 53.19 Germany T5 G 15 ST-IG
65 Costco Consumer Goods 1983 52.94 US T2 T3 9 ST-IT
66 Target Consumer Services 1962 52.62 US D T3 7 SD-IT
67 Thyssenkrupp Industrials 1860 52.34 Germany T3 G 15 ST-IG
68 Morgan Stanley Financials 1935 52.08 US T4 T4 9 ST-IT
4. Implications for theory and testing
The literature on organisational classication (Carper and Snizek, 1980; McKelvey, 1975, 1978; Rich, 1992) has long
recognised that a successful classication scheme should be consistent with prevailing theory while also reecting the world
as it is perceived. This generates condence in its applicability which in turn promotes widespread acceptance and use by
researchers, teachers and practitioners. Taking the lead from the designers of the inuential business and management
classications mentioned in the previous section, classication schemes informtheory building in ve main ways. First, they
provide a framework within which researchers can think about ideas and form opinions; stimulating reection on related
topics that might previously have seemed unconnected, and they provide direction in rening existing theories and
developing new theory. Second, classication schemes emphasise the conceptual traditions from which theory develops.
This helps to ensure that concepts are applied consistently with the existing body of theory; and by identifying trends in the
development of the literature, classication schemes help to shed light on areas that need newtheory building, replication or
validation studies, or newempirical approaches. Third, classication schemes assist in identifying the common and disparate
elements of alternative theories and in clarifying the value of specic contributions. By enhancing clarity and reducing
confusion, they help researchers to focus on promising directions while avoiding sterile debates. Fourth, classication
schemes support the compilation of complete and systematic data sets to test the various theories, and this spurs the
development of the discipline. Finally, classication schemes caution scholars that because of the richness and variety of
business forms, no single high-level theory is likely to capture all their complexity, no matter how elegant the theoretical
framework.
These insights apply to our classication systemof rm-level multinationality. The rich ecology of international business,
inhabited by rms of different age, size, industry, country of origin and degree of multinationality, means that each rmwill
have a unique combination of objectives, strategies, opportunities and constraints. Given their nancial, management and
knowledge resources, internationalising rms choose a level of engagement with foreign markets that maximises their risk-
adjusted expected returns net of expected costs. We should therefore expect to observe many alternative patterns of
internationalisation, and the agenda of IB research is rightly focussed on assessing whether a small, manageable set of high-
Table 4 (Continued )
(1) (2) (3) (4) (5) (6) (7) (8) (9)
Rank Firm Industry Age Size Location Sales Subs Category
69 Suez Utilities 1858 51.63 France T5 G 15 ST-IG
70 Renault Consumer Goods 1899 51.44 France T5 G 15 ST-IG
71 Pzer Health Care 1849 51.30 US T3 G 15 ST-IG
72 Johnson & Johnson Health Care 1886 50.51 US T5 G 15 ST-IG
73 RWE Utilities 1990 50.42 Germany T4 G 15 ST-IG
74 Barclays Oil & Gas 1690 49.98 Britain T4 G 15 ST-IG
75 Merrill Lynch Financials 1914 47.78 US T5 T5 9 ST-IT
76 Dow Chemical Basic Materials 1897 46.31 US T3 T5 9 ST-IT
77 United Health Health Care 1977 45.36 US D D 1 SD-ID
78 Sojitz Industrials 1892 45.22 Japan T4 T5 9 ST-IT
79 Wellpoint Health Care 1900 45.15 US D D 1 SD-ID
80 Microsoft Technology 1975 44.28 US T2 G 15 ST-IG
81 Metlife Financials 1914 44.07 US T2 T4 9 ST-IT
82 Mitsubishi Industrials 1870 43.90 Japan T4 G 15 ST-IG
83 Nee Corporation Industrials 1899 43.88 Japan T2 G 15 ST-IG
84 AT&T Telecommunications 1983 43.86 US D T4 7 SD-IT
85 Time Warner Consumer Services 1990 43.65 US T4 G 15 ST-IG
86 Fujitsu Industrials 1935 43.57 Japan T5 G 15 ST-IG
87 Goldman Sachs Financials 1869 43.39 US T4 T3 9 ST-IT
88 CNP Assurances Financials 1857 43.27 France T2 Rl 6 ST-IR
89 Lowes Consumer Services 1946 43.24 US D D 1 SD-ID
90 United Parcel Service Industrials 1907 42.58 US T2 G 15 ST-IG
91 United Technologies Industrials 1929 42.28 US T4 G 15 ST-IG
92 Walgreen Consumer Goods 1901 42.20 US D D 1 SD-ID
93 Japan Tobacco Consumer Goods 1949 42.18 Japan T3 T3 9 ST-IT
94 Aeon Consumer Services 1758 40.29 Japan T3 T4 9 ST-IT
95 Tyco International Industrials 1962 39.73 US T4 T2 9 ST-IT
96 Glaxosmithkline Health Care 1902 39.41 Britain T3 G 15 ST-IG
97 Intel Technology 1968 38.83 US T4 T5 9 ST-IT
98 Safeway Consumer Goods 1915 38.42 US Rl Rl 4 SR-IR
99 Medco Health Care 1668 37.87 US D D 1 SD-ID
100 Mitsui Industrials 1947 37.43 Japan T5 G 15 ST-IG
Notes. This table illustrates the application of the classication scheme to the largest (by sales) 100 rms in our G7 sample, ranked by sales (column 1). The
columns provide the following information: company name (2), industry (3), date of formation (4), size measured by sales in US$ billions (5), the location of
headquarters (6), the geographic categorisation of sales (7) and investments (subsidiaries) (8), and the number category and description of degree of rm-
level multinationality (as in Table 3) (9).
level theories can explain a wide range of patterns in a meaningful and insightful way. The main theories of
internationalisation have beendiscussed and evaluated by many scholars (for example, Andersen, 1997; Oviatt &McDougall,
1994; and Hutzschenreuter, Pederson, & Volberda, 2007), and it is not our intention to repeat this exercise here. To illustrate
the usefulness of our proposal for an agreed classication of rm multinationality to high-level theory building in IB, we
show how it casts light on the three best-known theories of the internationalisation process: the OLI paradigm (Dunning,
1993, 2000), the PTI or Uppsala model (Johanson &Weidersheim-Paul, 1975; Johanson &Vahlne, 1977) and the NVIT (Knight
& Cavusgil, 1996; Oviatt & McDougall, 1994, 2005).
While the OLI paradigm focuses on discrete rational decision-making and the PTI emphasises organisational learning,
both theories imply that the internationalisation process will be a sequential onein which rms initially internationalise
into geographically, culturally and psychically close markets at shallow levels of entry mode. As their OLI advantages
increase over time, or as they learn and gain experience and condence according to the PTI, rms will reach further aeld at
deeper levels of engagement. This process has been described in life-cycle terms by Aharoni (1966), and Dunning (1993)
outlines ve stages of a rms internationalisation: from exporting to direct sales, to part foreign production that leads over
time to new foreign production that deepens and widens the value-added network, and nally to regional and global
integration.
More recent work by Barkema and Drogendijk (2007) and others, however, suggests that the time dimension of
alternative internationalisation patterns can be very different across rms. This notion is embedded in the NVIT of Oviatt and
McDougall (1994, 2005). Oviatt and McDougall (2005) dene an INV as a rm that seeks competitive advantage from its
resources and outputs in many countries frominception, and several studies since Knight and Cavusgil (1996) conrmtheir
pattern of rapid globalisation. INVs clearly do not t the traditional prole of MNCs (Hashai & Almor, 2004), and their
increasing pervasiveness poses challenges to the stages theories of internationalisation.
Jones and Coviello (2005) observe that combining the insights of the OLI paradigm, PTI theory, and NVIT suggests that
integrating multiple theoretical perspectives on rm-level characteristics and behaviour in a holistic and pluralistic manner
will yield a more complete understanding of the internationalisation process. Hutzschenreuter et al. (2007) further observe
that the key determinants of internationalisation in the OLI eclectic paradigm (assessing revenues, costs and risks) and PTI
theory (accumulating experience), along with the knowledge-based view of Kogut and Zander (1993), yield incremental,
path-dependent patterns that are largely external to managerial initiatives, positions and strategies. Given that a holistic
approach to understanding internationalisation necessitates joint consideration of paths, process and positions,
Hutzschenreuter et al. (2007) ask whether each rms journey is different or whether generic patterns exist. In so doing,
they propose a classication of managerial intentions to highlight the role of positions. Our classication scheme for rm-
level multinationality encompasses each of the high-level theories of internationalisation and is consistent with the
conceptual traditions from which they emergethat is, it embraces the paths, processes and positions that underlie the
main theories of internationalisation.
To see this, consider ve alternative patterns of internationalisation within our scheme, which are depicted in Fig. 1:
Example 1: Shallow internationalisation in stages: SD-ID!SR-ID!ST-ID!SG-ID. A purely domestic rm (SD-ID)
internationalises across the sales row of the matrix of rm multinationality as it expands exports in its home region to
become an SR-ID regional rm, then across regions to become an ST-ID trans-regional rm, and eventually across all
regions to become an SG-ID global rm, with global sales but with no foreign subsidiaries.
Example 2: Balanced internationalisation in stages: SD-ID!SR-IR !ST-IT !SG-IG. This rm expands the geographical
spread of its trading operations along with its foreign subsidiaries into its home region to become an SR-IR regional rm,
then expands its sales while extending its network of subsidiaries across regions to become an ST-IT trans-regional rm,
and eventually across all regions to become a deeply global SG-IG rm.
Example 3: Deep internationalisation in stages: SD-ID!SD-IR !SD-IT !SD-IG. Apurely domestic rminternationalises by
expanding its subsidiary operations to other countries in its region (becoming an SD-IR rm), then across regions to
become an SD-IT trans-regional rm, and eventually establishing a fully global network of subsidiaries to become an SD-
IG rmwith global subsidiaries and purely domestic sales.
Example 4: Rapid shallow internationalisation: SR-ID!SG-ID. This describes the internationalisation of an INV rm that
begins by trading outside its home base but within its region as an SR-ID regional rm, and quickly expands its sales to all
regions of the world to become an SG-ID global rm with no foreign subsidiaries.
Example 5: Born trans-regional: ST-IR !SG-IR !SG-IT. This describes the internationalisation of an INVrmthat begins by
trading across regions while establishing subsidiaries in its home region, and then expands the breadth of its sales to
become an SG-IR global rm. This is followed by further expansion of its subsidiaries across regions to become an SG-IT
global rm with trans-regional subsidiaries.
Examples 1, 2 and 3 are consistent with OLI and PTI, and examples 4 and 5 are consistent with the INVT that skips the
traditional stages of internationalisation. Many other patterns of internationalisation can be described using our
classication system. Some will be consistent with either or both OLI and PTI, some will be consistent with INVT, and others
will be incompatible with all threeour classication system accommodates yet unobserved patterns of internationalisa-
tion. In this vein, Matthews and Zanders (2007) suggestion of international entrepreneurial dynamics to capture pre-
internationalisation entrepreneurial experiences of INV rms is also encompassed within our systemas it includes domestic
rms at one end of the spectrum of multinationality. Our main point here is that categorising rms by their degree of
multinationality yields insights into prevailing theories of rm-level internationalisation patterns, while also providing the
framework for conceptualising new combinations and patterns.
Hull (1965) describes how biological classications prior to Darwin were static insofar as species were classied into
xed groups on a permanent basis. Darwins evolutionary theory showed how species can evolve within and across groups,
and this stimulated the emergence of phylogenic (or evolutionary) classication systems. McKelvey (1982) and others have
reinterpreted Darwinian evolutionary theory to describe how organisations can evolve across groups within phylogenic
classes, and Rich (1992) illustrates howtheory-builders can use phylogenics as a lens to look into the past in order to explain
the present. Although the traditional Darwinian model sees evolution occurring slowly over long periods, revolution can
sometimes occur when external shocks create jumps in evolutionary adaptation. Similarly, in IB we have seen the
revolution that is the INV; the shock being fast-developing innovations in communication and transportation technology.
Our matrix of rm multinationality facilitates longitudinal examination of the broad range of internationalisation patterns
that we now observe, from the slowly evolving large rm to the dynamic and ambitious INV.
Our classication scheme is neutral with respect to the typologies of MNCs managerial intentions, marketing strategies
and entry modes. It can facilitate analysis of Dunnings (1993) why rms engage in FDI, Hill et al.s (1990) how rms enter
newmarkets, Perlmutters (1969) managerial orientations, and Bartlett and Ghoshals (1989) organisational forms. It can be
used to describe and analyse, for example, howand why a Chinese mining rmengages in resource-seeking FDI in Africa (a la
Hill et al., 1990 and Dunning, 1993), and how it manages the operation either by retaining full control in China (a la
Perlmutters home-country ethnocentric orientation), or by decentralising and delegating responsibilities to its African

SD-ID SR-ID ST-ID
SG-ID
SD-IR SR-IR ST-IR SG-IR
SD-IT SR-IT ST-IT SG-IT
SD-IG SR-IG ST-IG SG-IG
Example 1: Shallow internationalisation in stages
Example 2: Balanced internationalisation in stages
Example 3: Deep internationalisation in stages
Example 4: Rapid shallow internationalisation
Example 5: Born trans-regional
D
e
e
p
e
r

e
n
g
a
g
e
m
e
n
t
Broader geographical spread
Fig. 1. Possible internationalisation paths.
subsidiary (a la Bartlett and Ghoshals multinational rm). Our classication scheme can also be used to study a born trans-
regional Norwegian software rm that operates in four regions, selling its products via the internet, and establishing a
transnational organisational structure with dispersed and interdependent teams of software developers (a la Bartlett and
Ghoshal).
Our classication scheme can also be used as a framework for consistent empirical testing of MNC typologies. In his
critique of typologies of strategy, Miller (1996) argues that they are rarely tested empirically, and when they are, they are
usually found to fall short. This is in part
. . ..because approaches vary greatly among studies: different variables, operationalizations and samples are used to
test the same typologies. Moreover, conicting ndings are rarely resolved as researchers build too little on each
others work. Many scholars, for example, have tested [various typologies of strategy] using ambiguous and divergent
operationalizations and sample denitions. So results remain inconclusive after many years of work.
[Miller, 1996, p. 506]
In short, Miller (1996) points out problems with empirical tests of typologies that are similar to our critique of the body of
empirical work on MNCsinconsistent operational denitions and sample selection across studies.
4.1. Implications for sample selection
We have seen how the MNC has been operationally dened using a diverse and sometimes eccentric collection of
characteristics, which contributes to inconsistent and often contradictory ndings. This problemis exacerbated by the use of
samples that are too general and broadly specied to yield meaningful results that can reliably support or reject prevailing
theory. McKelvey (1978) highlighted this problem more than 30 years ago with an insightful analogy:
Consider a typical study on four organizations: a gear manufacturer, a large engineering rm, a small retail store, and a
social welfareagency. The investigator wouldtypicallyclaimthat ndings fromsucha sample(andpopulation) wouldbe
more broadlyapplicable thanif the study were limitedto, say, small stores. This sample is akintoa biologists wanting to
make broad statements about heartbeat rates based on a sample of one elephant, one tiger, one rabbit, and an alligator.
Obviously, no meaningful biological population is dened by such a sample, and surely no one would believe the
researchers statements about heartbeats. They would probably wonder if the researchers elephant was at all
representative of other elephants perhaps it was older, more vigorous, or bigger than the average elephant, and so on.
[McKelvey, 1978; pp. 1437-1438].
McKelvey advocates narrowing the selection process to create samples of rms with similar characteristics. The
resulting loss of generalisability would be . . ..offset by gains in the denitiveness of the ndings, the levels of variance
explained, and the applicability of the results to the population. In short, solid ndings about a narrower population are
better than marginal ndings of questionable generalizability to a broadly dened population. (McKelvey, 1978: 1438). A
valid alternative to this approach is to gather a large, diverse sample and to control for different characteristics. Our
classication system facilitates the selection and compilation of both of these types of samples. In the next section, we
provide examples of how this can be done.
5. Future research directions
In addition to providing a framework for empirical testing of high-level internationalisation theories and typologies, our
classication systemprovides fresh perspectives on current debates and opens up the possibility of newresearch directions.
Some examples are provided here.
5.1. Standardised marketing strategies and MNC performance
The question of whether MNCs use standardised or localised approaches in foreign markets to branding, pricing, product
mix, promotion, and distribution channels, and which of these delivers superior performance, yields mixed results that are
difcult to generalise and reconcile (Grifth, Chandra, & Ryans, 2003; Cui & Lui, 2005; Han & Kim, 2003; Krum & Rau, 1993;
Liu & Pak, 1999; Theodosiou & Katsikeas, 2001; Xu, Cavusgil, & White, 2006). This arises largely because of inconsistent
approaches to the operational denition of MNC. Liu and Pak (1999), for example, studied 35 rms with venture locations in
Beijing and Shanghai on the basis of personal knowledge of the management team, whereas Grifth, Chandra, and Ryans
(2003) used a random sample of US Fortune 750 rms with Indian operations, and Han and Kims (2003) sample comprised
the 200 largest Korean exporters to China with head ofces in Seoul. Because of the widely disparate approaches to sample
selection, the ndings from these studies cannot easily be compared to related studies, and this makes it difcult for
researchers to build on prior work.
International marketing researchers could use our classication scheme as a framework for constructing samples that
are more consistent across studies, facilitating more effective comparison. By thinking carefully about the type of rmthat
is to be included in a sample dened by such features as the country of its headquarters, the range of its international
experience, and the markets in which it operates our classication scheme also assists researchers to balance the
tradeoffs between narrowing the sample in order to address very specic research questions, and obtaining generalisable
conclusions.
5.2. Firm-level multinationality and foreign exchange exposure
Firms become more directly exposed to exchange rate movements as they internationalise, but highly internationalised
rms with assets and earnings denominated in many currencies are naturally hedged insofar as exchange rates are
imperfectly correlated. Using a data set of 220 US rms fromthe Fortune 500 list, Pantzalis, Simkins, and Laux (2001) dened
MNCs as rms with at least one foreign subsidiary, and they used two measures of rm-level multinationality: the number of
foreign countries in which the rmhad subsidiaries, and the number of foreign subsidiaries in its top two foreign countries
(as a measure of concentration). Consistent with theory, and conrming the importance of the extent of the rms
international operations on its exchange rate risk, they found that the greater the number of foreign subsidiaries the lower
the foreign exchange exposure, and that greater concentration is associated with higher foreign exchange exposure. Using a
sample of over 3000 rms from23 OECDcountries, Hutson and Stevenson (2010) found that the more open the economy, the
greater the degree of rm-level exposure. This, they argue, is due to rms in open economies being more exposed to indirect
foreign exchange exposurethat is, the exposure arising from the competitive environment in which the rm operates
(Bodnar, Dumas, & Marston, 2002).
Future research could usefully use our classication scheme to provide a more consistent approach to sample selection
together with a superior measure of the degree of rm-level multinationality. For example, researchers could examine
whether purely domestic rms those that are internationally undiversied experience greater foreignexchange exposure
than highly internationalised rms. Researchers could also compare the exposure experience of rms with varying degrees
of breadth and depth of multinationalitysuch as type 10 SG-ID rms with global sales and no foreign subsidiaries versus
type 13 SD-IG rms with no foreign sales but with global subsidiaries.
5.3. Firm-level multinationality and performance
We saw in section 2 how divergent approaches to operationally dening the MNC has contributed to disparate
ndings and ongoing debate on whether rm-level multinationality delivers enhanced performance. Having analysed
more than 100 empirical studies spanning 3 decades, Contractor (2007) concluded that the multinationality-performance
literature is mixed, confusing and contradictory, and asked What exactly do we mean by internationalisation or degree
of internationalisation? At the very least it is incumbent on authors to state the exact construction of their DOI [degree of
internationalisation] variable in their papers. (p. 469). Bausch and Krist (2007) argued that since there is no universal
internationalisation-performance relation, rather than looking for generalisations, future research should develop more
nely-grained modelsdifferentiating between rms of different age, size, country of origin, industrial sector, product
diversication, and R&D intensity. Hennart (2007) concurred, suggesting that empirical studies have been undertaken at
too high a level of aggregation, and that rather than building ever-more sophisticated measures of multinationality,
researchers should focus on the key dimensions of multinationality such as the size of foreign sales versus their
dispersion.
Our classication scheme addresses these concerns and provides an appropriate framework for analysing the
multinationality-performance issue. Using the scheme, Berrill and Kearney (2010) showed that more internationalised
MNCs deliver superior risk-adjusted equity returns after controlling for size, industry and country effects. Subsequent
research could usefully generalise this approach. For example, researchers could build large cross-country databases to
examine whether rms that expand domestically exhibit different performance trajectories to rms that expand
internationally, controlling for country, regional and other effects. A related research question is, is expansion within the
home region associated with different performance vis-a` -vis expansion across regions? Further, does this pattern depend on
the depth dimension of internationalisation? For example, are there differences in performance between type 5 ST-ID rms
with trans-regional sales but no foreign investments and type 9 ST-IT rms with trans-regional sales and investments?
5.4. The regional/global debate
The extent to which the worlds largest MNCs have a truly global outlook remains a hotly debated topic. Some scholars
(Govindarajan & Gupta, 2008; Yip, 2002) argue that global strategy is paramount, while others such as Doremus, Keller,
Pauly, and Reich (1998) and Ghemawat (2001, 2003, 2005) argue the case for semiglobal strategy. Rugman (2000, 2003,
2005), Rugman and Hodgetts (2001), Rugman and Verbeke (2003, 2004) and Collinson and Rugman (2008) go further in
arguing that the worlds largest MNEs operate mostly within their home regions, that very few are global, and that global
strategy is a myth. Rugman and Hodgetts (2001, p. 341), for example, conclude that the CEOs of MNCs should ..encourage all
[their] managers to think regional, act localand forget global. Understandably, this has not gone unchallenged. Aharoni
(2006), Asmussen (2009), Westney (2006), Dunning, Fujita, and Yakova (2007), Flores and Aguilera (2007), Osegowitsch and
Sammartino (2008), Tallman (2007), Vives and Svejenova (2007) and Eden (2008) have introduced renements to Rugmans
approach to categorising rms and demonstrated that the evidence in favour of regionalisation over globalisation is not
persuasive.
Our classication scheme provides a useful framework to contribute to this debate. In Table 5 we provide a breakdown of
multinationality for our data set by sales and subsidiaries separately (in Panels A and B, respectively), and also by country. A
substantial proportion of the rms are purely domestic (20 percent using sales as the measure of multinationality and 17
percent using subsidiaries); there are relatively fewregional rms (4 percent using sales and 11 percent using subsidiaries);
and most are trans-regional (73 percent using sales and 59 percent using subsidiaries). While only 3 percent of our rms
have global sales, 13 percent have global subsidiaries. When the trans-regional rms are added together with the global
rms, it is clear that the vast majority operate beyond their home regions874 rms (76 percent) by sales and 838 (72
percent) by subsidiaries.
In contrast to the ndings of Rugman and his co-authors, therefore, our classication scheme suggests that in the G7 data
set there are relatively few regional rms, the vast majority are trans-regional, and there are a substantial proportion of
global rms. Why are the ndings so different from those of Rugman and co-authors? First, our classication scheme
includes all countries in the world. Second, with the exception of Collinson and Rugman (2008), all of the Rugman studies
used sales as the sole depth measure of multinationality. It is clear fromour sample that large rms based in the G7 countries
have a greater global reach in subsidiaries than in sales. Third, we impose no activity thresholds. Our ndings suggest that
rather than being a myth, global strategy is a reality of modern international business. As this debate continues, researchers
could use our classication scheme to construct larger and broader datasetsto include, for example, listed rms from
emerging regions. It could also be used to examine the issue in a narrower way; for example, to examine the international
reach of SMEs based in a particular country or region, or to look more carefully at the extent of multinationality of rms in
particular industries.
5.5. Business in developing and emerging markets
Developing andemerging markets nowcapture increasing proportions of worldwide inwardandoutwardFDI andtrade,
andare consequently the focus of muchrecent research(Arregle, Beamish, &He bert, 2009; Buckley, Clegg, Forsans, &Reilly,
2001; Buckley & Ghauri, 2004; Cuervo-Cazurra, 2008; Flores & Aguilera, 2007; Gupta & Wang, 2009; Kali & Reyes, 2007;
Khanna, Palepu, & Sinha, 2005; Wu & Strange, 2000). MNCs fromthe triad increasingly pursue strategies to overcome the
resource deciencies and other limitations of doing business in developing countries, and rms from developing and
emerging economies analogously devise strategies to compete in their own and developed markets (Agular et al., 2006;
Aulakh, Kotabe, & Teegen, 2000; Hoskisson, Eden, Lau, & Wright, 2000; Seelos & Mair, 2007). Guillen and Garcia-Canal
Table 5
Are the G7 rms regional or global?
Canada France Germany Italy Japan UK US Total G7
Panel A: Sales
D 13 (23) 6 (6) 5 (5) 46 (30) 16 (9) 7 (8) 136 (29) 229 (20)
R1 7 (12) 8 (7) 3 (3) 7 (5) 5 (6) 10 (2) 40 (4)
T2 17 (30) 16 (15) 26 (27) 37 (24) 33 (20) 22 (24) 110 (23) 261 (23)
T3 10 (18) 23 (21) 19 (19) 16 (11) 45 (27) 16 (18) 78 (17) 207 (18)
T4 7 (12) 27 (25) 15 (15) 20 (13) 49 (29) 19 (21) 78 (17) 215 (19)
T5 3 (5) 21 (20) 24 (24) 17 (11) 25 (15) 14 (15) 48 (10) 152 (13)
T 37 (65) 87 (81) 84 (85) 90 (59) 152 (91) 71 (78) 314 (67) 835 (73)
G 6 (6) 7 (7) 9 (6) 7 (8) 10 (2) 39 (3)
Total 57 107 99 152 168 90 470 1143
Panel B: Subsidiaries
D 5 (12) 19 (18) 5 (5) 50 (36) 20 (9) 6 (7) 87 (18) 192 (17)
R1 20 (20) 13 (13) 31 (23) 6 (3) 13 (15) 34 (7) 117 (10)
R2 1 (1) 3 (3) 4 (3) 8 (1)
R 21 (21) 16 (16) 35 (26) 6 (3) 13 (15) 34 (7) 125 (11)
T2 16 (37) 9 (9) 19 (19) 19 (14) 29 (14) 11 (12) 75 (16) 178 (15)
T3 11 (25) 15 (15) 17 (17) 13 (10) 58 (28) 12 (14) 70 (15) 196 (17)
T4 8 (19) 14 (14) 9 (9) 6 (4) 53 (25) 14 (16) 67 (14) 171 (15)
T5 2 (5) 5 (5) 7 (7) 4 (3) 28 (13) 13 (15) 85 (18) 144 (12)
T 37 (86) 43 (42) 52 (52) 42 (31) 168 (80) 50 (57) 297 (63) 689 (59)
G 1 (2) 19 (19) 26 (27) 10 (7) 16 (8) 19 (21) 58 (12) 149 (13)
Total 43 102 99 137 210 88 476 1155
Notes. In this table we categorise the G7 rms using our classication system, reporting gures for the sales (Panel A) and subsidiaries (Panel B) depth
dimensions separately, with percentages in brackets. Of the 1289 G7 rms in the initial sample, data were available on the geographic spread of sales for
1143 and of subsidiaries 1155. The breadth dimensions are D, R1, R2, T2, T3, T4, T5 and G. We add together data for regional rms (R) and trans-regional rms
(T) overall; adding together the numbers in bold gives the total for each column. (There are no R3 rms in subsidiaries, and all of the regional (R) rms in
sales are R1).
(2009) reviewed research on the variously-labelled new, emerging and unconventional MNCs fromemerging markets,
and how their rationales, paths and speeds of internationalisation differ from those of the more traditional MNCs. These
new MNCs must deal withthe disadvantage of being latecomers inadditionto the liability of foreignness, but this is offset
by specic skills such as project execution, networking, and dealing with institutional weakness and political instability
(Aulakh, 2007; Campa & Guillen, 1999; Goldstein, 2007; and Cuervo-Cazurra & Genc, 2008). Our classication system
provides a framework for examining a range of issues related to the regional, trans-regional and global strategies of rms
beyond the worlds developed economies. For example, researchers could use our classication scheme to study the extent
to which new MNCs in Africa, Asia, and Latin America internationalise within and beyond their regions. It could also be
used to investigate the pre-internationalisation strategies of small, young rms as well as the patterns of
internationalisation of emerging market INVs (Matthews & Zander, 2007). Researchers could also use our scheme to
informthe construction of rm-level samples with greater granularity in order to examine entry mode choices and effects
in developing and emerging markets.
5.6. Longitudinal studies
The prevailing theories of rm-level internationalisation, together with the many patterns of internationalisation that
are traced by rms of different age, size, industry and home country, suggest that there is no standard or optimal path of
international expansion (Buckley & Chapman, 1997; Fillis, 2001). Whether rms internationalise slowly according to one
or more of the stages theories of internationalisation, or rapidly according to INVT, the common dimension is time. It
seems surprising, therefore, that there have been relatively few longitudinal studies of internationalisation. We believe
that this will soon change. Contractor (2007) and Hennart (2007) suggest that IB researchers should diversify away from
an almost exclusive reliance on cross-sectional data and embrace longitudinal studies as the best approach to achieving a
more complete understanding of the evolution of the MNC. Glaum and Oesterle (2007) advocate the benets of a
longitudinal approach on the relation between rm-level multinationality and performance, and Brouthers and Hennart
(2007) and Canabal and White (2008) suggest that longitudinal data should be used in studies of entry mode. As
illustrated in section 4.1 with three examples of rms that follow different paths of internationalisation our
classication scheme is well placed for use as a framework for longitudinal analysis of rm internationalisation.
Researchers can use the scheme to construct appropriate samples and to trace the processes and paths
internationalisation as rms proceed across the matrix of rm multinationality. Researchers could also use our
framework to study the patterns, processes and consequences of de-internationalisation. Finally, given its usefulness for
studying patterns of international business over time, our classication scheme provides a framework for historical
analysis of MNCs (Jones & Khanna, 2006).
6. Concluding comments
A distinguishing feature of the IB discipline is the use of alternative theoretical frameworks to approach empirical
questions at different levels of analysisthe industry, the rm, its management, and other stakeholders (Buckley & Lessard,
2005). The domain of questions spanned by the discipline includes but is not restricted to the activities, strategies, and
structures of MNCs, and the interactions between themand other rms, governments and civil society. In this paper, we have
focussed on one level of analysisthe rm. From a comprehensive review of all papers published in the top international
business and management journals that have used empirical MNC samples to study a wide range of questions, we have
shown that the degree of rm-level multinationality which is one of the disciplines most important dimensions is not
tied down. The absence of an agreed approach to operationally dening or measuring multinationality at the level of the rm
is reected in a lack of consistency in how IB scholars think about both high-level and domain-specic theory building and
testing. This has hampered the development of the discipline by stymieing innovation in theory and causing confusion in
empirical testing. This in turn has curtailed the validation or rejection and renement of existing theorya process that is
essential for scientic advancement.
Given the complex and dynamic IB landscape with its rich ecology of rms of varying age, size, industry, strategy and
international scope, it is unlikely that agreement can be reached on a single denition of the term MNC. IB scholars should
instead seek agreement on a classication systemfor the degree of rm-level multinationality that can be used to classify all
rms with respect to the extent of their international involvement. In this paper, we have sought to establish the benets to
the discipline of agreeing upon such a classication system. We have demonstrated how such a scheme can encompass the
prevailing theories and typologies of rm-level internationalisation while facilitating improved sample selection and testing
in empirical research. We have pointed to the need for empirical researchers across the range of IB sub-disciplines to think
more clearly about their sample populations and the tradeoffs between narrowly versus broadly dened samples, and the
specicity versus the generalisability of their results. We have used our matrix of rm multinationality to suggest avenues
for research that have the potential to settle old debates, facilitate historical and longitudinal analysis at the level of the rm,
and open up new avenues of investigation.
Our proposed scheme facilitates managers, researchers, teachers and students to observe the landscape of IB. We have
proposed a simple matrix of rmmultinationality, and we hope that other researchers will build on this work and contribute
to a more coherent and consistent epistemology and methodology in IB discourse and research. Research on designing and
rening classication systems is now common in the arts, humanities and social sciencesmainly due to the expanding
availability of data. Increasing numbers of discipline-specic and interdisciplinary journals are devoted to developments in
classication, ontology, taxonomy and typology, as well as to the computational, mathematical and statistical
methodologies such as cladistics, clustering, neural networks and numerical taxonomy that are used to identify groups
within large data sets.
11
Although classication systems have been used in the business and management disciplines, the
more advanced quantitative methodologies have not yet been widely used.
12
Given the increasing availability of large rm-
level datasets, future research could usefully build on these techniques to construct enhanced classication systems of MNCs
across a variety of dimensions in addition to their degree of multinationality.
Acknowledgements
Previous versions of this paper were presented at the Academy of International Business (AIB) UK Conference in
Manchester in April 2006, the AIB Conference in Beijing in June 2006, the European International Business Academy (EIBA)
Conference in Fribourg Switzerland in December 2006, the Global Finance Conference in Melbourne in April 2007, the
INFINITI conference at Trinity College Dublin in June 2007, and the AIB Conference in San Diego, June 2009. We are grateful to
many participants in these conferences for helpful comments and suggestions.
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