Internationalization and Performance of Firms in China: Moderating Effects of Governance Structure and the Degree of Centralized Control

Abstract

This study proposes necessary modifications to the existing internationalization-performance relationship to meet the idiosyncrasies of China-specific contexts. We first hypothesize an S-shaped internationalization-performance relationship as the baseline and then investigate the moderating effects of a firm's governance structure and the degree of centralized government control on the relationship between its internationalization and performance. The results, based on a longitudinal sample of manufacturing firms in China for the 2001-2007 period, indicate that (1) the S-shaped internationalization-performance relationship holds for firms in China; (2) the governance structure moderates the internationalization-performance relationship such that increased profitability through internationalization is more likely for modernized firms than for their conventional local counterparts; and (3) the degree of centralized control moderates the internationalization-performance relationship such that increased profitability through internationalization is more likely for firms affiliated with higher level governments than for those affiliated with lower-level governments. (C) 2013 Elsevier Inc. All rights reserved.