Internationalization and Organizational Performance: The Case of Emerging Market Group Affiliated Firms

The purpose of this study is to examine the impact of business-group-affiliatedness on the relationship between internationalization and firm performance in an emerging market by comparing them to independent firms. It also attempts to empirically test whether there has been a ‘learning effect’ of internationalization, which is understood to mean that the experience of internationalization could affect the performance of internationalized firms. By examining 409 manufacturing firms listed in the Korea Stock Exchange, we first find that Korean emerging market group affiliated firms (EGAFs) do not benefit from internationalization, at least, on the basis of a yearly performance indicator, which is in sharp contrast to that of independent firms for which an inverted U-shaped performance-internationalization relationship are found. Second, as for the relationship between firm performance and internationalization experience, the present study finds no evidence for EGAFs, but found an S-shaped relationship for the independent firms when the degree of internationalization is below one standard deviation. Overall, these findings suggest that EGAFs have their own characteristics in their international business which have not yet been explored much in the extant IB literature. It also suggests a future research avenue to consider that is an important but ignored issue in IB literature: the effects of internationalization experiences on firm performance in emerging markets and, in particular, EGAFs.