20091031 Mgmt205 Presentation Final
-
Upload
doud52 -
Category
Technology
-
view
200 -
download
0
description
Transcript of 20091031 Mgmt205 Presentation Final
20-Nov-09
1
Hypothesis ResultsModelBackground
The impact of size on
internationalization success
Romain • Benedict • Alvin • Melvin • Kendrick
1
Hypothesis ResultsModelBackground
Objective & Relevance
Objective
Evaluating the significance of firm size in successful
internationalization of Singaporean firms.1
Identifying the determinants for internationalization
success2
Relevance
Challenging a common wisdom: size matters in
internationalization1
New Context: Advancing the debate on determinants of
internationalization success with an Asian-based study2
Background
Dominance of Business Groups in Asia: Most companies
with international operations tend to belong to larger
business group
3
2
20-Nov-09
2
Hypothesis ResultsModelBackground
Firm Size & Internationalization
Background
« One of the most widely analyzed relationship » (Bonaccorsi 1992)
Little consensus
1
2
Difference in study methodology
Difference in the way of measure
Cavusgil 1984:
1
2
Number of employee : no relationship
Sales : strong relationship
3
Hypothesis ResultsModelBackground
Firm Size & Internationalization
Background
Firm Size
Multi-nationality and Performance
Risk appetite and Commitment
Capacity to manage
complexity
Organizational Resources
RBV (quality, scale and scope)
Entry Mode
Size-Related
Success Factors
IB Theoretical
Framework
Access to Supporting Resources
4
20-Nov-09
3
Hypothesis ResultsModelBackground
• Porter 1986: « big firmshave a competitiveadvantage in the internationalizationprocess »
• A positive correlation isoften taken as granted.
False pastassumption
• Focus only on export (Gertner 1987)
• Focus on one kind of firm(Holzmuller and Kasper1991)
Missingresearch
• « the larger the business the more likely it is to export » Gertner, 1987
• « Size does not affect the firm’s interest in exporting» Swiercz 1991
• « Size is an important factor when the firm is verysmall » Cavusgil 1976
• « Size has an indirect effect on the firmpropensity to export in the case of the medium and large companies » Casper 1991
Differentresults
Firm Size & Internationalization
Background 5
Hypothesis ResultsModelBackground
Data: Asian Sample
Background
North
America
Europe
USA (6)
1975 2009
Asia
6
Japan
(1)
Denmark (1)
Canada (1)Canada (1)
Time
Sample
Region
UK(2)
India(1)
Italy
(2)
Sweden and Italy (4)Austria (1)
Europe (1) Europe (1)
20-Nov-09
4
Hypothesis ResultsModelBackground
Data: Asian Sample
Background
End two decades of inconsistency
1
2
Using both kind of measures for the size of the firm (sales and number of employees)
« internationalization success » with FSTS method (Click and Harison, 2000)
3 Analysing all kind of firms: small and big in a sample from Singapore
7
Hypothesis ResultsModelBackground
Framework
Results8
Solving the puzzle
1 Full Sample Regression
2 Comparative Analysis
3 Subsample Regression
Does firm size matter
to
internationalization
success?
The bigger the firm, the
higher is its probabiliy to
succeed internationally
Firm size matters up to a
certain point but not for
others
Method Hypotheses
20-Nov-09
5
Hypothesis ResultsModelBackground
Hypotheses
Hypothesis
The bigger the firm, the higher is its
probabiliy to succeed internationally
Firm size matters up to a certain point
but not for others
Type of Relationship Expected Outcome
Continuous
Positive Linear
Discontinuous
Curvilinear
Results
?
?
Hypothesis ResultsModelBackground
The Model
Internationalization success
SizeAlternative Explanatory
Variables= +
Dependent Variable Independent Variable Control Variables
International Sales
Total Sales
Total Sales
Model
Total Employees
20-Nov-09
6
Hypothesis ResultsModelBackground
Control Variables
Model
Numerical Variables Measure References
Business Experience Age of the firm Majocchi (2005)
International Experience Number of international
markets
Ekeledo & Sivakumar (2003)
Performance Return on Assets (ROA) Gomes & Ramaswamy (1999)
Physical Proximity Straight line distance Gertner (2006)
Cultural Distance Hofstede’s CDI Thirkell & Dau (1998)
Dummy Variable Measure References
Industry Sector Binomial Categorization Grøgaard (2005)
Hypothesis ResultsModelBackground
Framework
Results12
Solving the puzzle
1 Full Sample Regression
• Two measures of firm size are used: Total Sales and Total number of Employees
• All data points are included in the regression
2 Comparative Analysis
• Reviewing internationalization success in each sample group – by size
• Both definitions of firm size were reviewed
3 Subsample Regression
• Sample is divided by groups depending on size (<10mil, 10-100 mil, >100mil)
• Both definitions of firm size are reviewed,
Does firm size matter
to
internationalization
success?
20-Nov-09
7
Hypothesis ResultsModelBackground Model
The Model – Total Sales
Total Sales
Model 2 Model 3 Model 4 Model 5 Model 6
Number of Markets
Return on Assets
Age of Firm
Cultural Distance
Physical Distance
Industry Type
Independent Variables Model 7 Model 8
Hypothesis ResultsModelBackground Model
The Model – Total Employees
Total Employees
Model 2 Model 3 Model 4 Model 5 Model 6
Number of Markets
Return on Assets
Age of Firm
Cultural Distance
Physical Distance
Industry Type
Independent Variables Model 7 Model 8
20-Nov-09
8
Hypothesis ResultsModelBackground
Data
Total Number of CompaniesIncomplete DataOutliers (across various fields)
The sample size of 272 companies was randomly selected from a population of Singapore incorporated companies.
Model
Source
Initial
Sample
Final
Sample
Sampling
Technique
OneSource Database Over 600,000 companies globallyCompany Websites
2723927
Complete data points 206
15
Hypothesis ResultsModelBackground
Data
Model
Int'l Sales/Total
Sales
Firm's Age
CEO's Age
# of Markets
ROA Total SalesCultural Distance
Physical Proximity
# of Employees
Mean 54% 31.54 51.49 5.08 $0.00 $849,150 1.12 2,954.09 2,734.87
Min 0% 4.00 39.00 1.00 -$0.91 $347 - - -
Max 100%
188.0
0 68.00 51.00 $0.41 $29,145,190 19.49 14,767.24 45,000.00
16
20-Nov-09
9
Hypothesis ResultsModelBackground
Summary of Results
17
Variables Model 1 Model 2 Model 3 Model 4 Model 5 Model 6 Model 7 ControlTotalSales -0.004 0.001 0.073 0.076 0.064 0.058 0.055
-0.070 0.012 1.065 1.123 0.942 0.827 0.786FirmAge 0.006 0.004 -0.042 -0.044 -0.056 -0.049 0.05
0.095 0.066 -0.614 -0.654 -0.818 -0.700 0.90Markets 0.135** 0.128** 0.215** 0.212** 0.228** 0.133**
2.268 2.161 3.153 3.113 3.348 2.258RoA -0.065 -0.072 -0.141** -0.139** -0.55
-1.097 -1.208 -2.055 -2.028 -0.944CulturalDistance -0.024 -0.034 0.078 -0.27
-0.393 -0.569 1.144 -0.446PhysicalDistance 0.513** 0.524** 0.517**
8.256 8.472 8.462Industry 0.083 0.087
1.404 1.482
Firm Size is not a
significant variable
Results
• Number of markets is a consistently significant variable • RoA and Physical Distance are also statistically significant
0.3130.308 0.304 0.059 0.058 0.044 0.04 0.02Adjusted R-Square
Hypothesis ResultsModelBackground
Summary of Results
18
Variables Model 1 Model 2 Model 3 Model 4 Model 5 Model 6 Model 7 Model 8Employees 0.048 0.054 0.147** 2.136 0.131* 0.121* 0.117*
0.803 0.907 2.173 0.034 1.925 1.733 1.691FirmAge 0.008 0.006 -0.042 -0.662 -0.058 -0.051 0.05
0.130 0.110 -0.623 0.509 -0.847 -0.726 0.90Markets 0.135** 0.129** 0.217** 3.158 0.230** 0.133**
2.273 2.178 3.205 0.002 3.393 2.258RoA -0.074 -0.081 -0.144** -2.067 -0.55
-1.251 -1.369 -2.106 0.040 -0.944CulturalDistance -0.024 -0.033 0.083 -0.27
-0.398 -0.552 1.235 -0.446PhysicalDistance 0.513** 0.523** 0.517**
8.265 8.479 8.462Industry 0.075 0.087
1.274 1.482
Firm Size is not a
significant variable
Number of Markets, RoA and Physical Distance are
significant variable
Results
0.3130.317 0.315 0.073 0.070 0.055 0.07 0.09Adjusted R-Square
20-Nov-09
10
Hypothesis ResultsModelBackground
Framework
Results19
Solving the puzzle
1 Full Sample Regression
• Two measures of firm size are used: Total Sales and Total number of Employees
• All data points are included in the regression
2 Comparative Analysis
• Reviewing internationalization success in each sample group – by size
• Both definitions of firm size were reviewed
3 Subsample Regression
• Sample is divided by groups depending on size (<10mil, 10-100 mil, >100mil)
• Both definitions of firm size are reviewed,
Does firm size matter
to
internationalization
success?
Hypothesis ResultsModelBackground
Further Analysis
3.78
4.84
6.10
4.20
0.00
1.00
2.00
3.00
4.00
5.00
6.00
7.00
0
10
20
30
40
50
60
70
80
< $30,000 $30,000 - $89,999 $90,000 - $349,999 > $350,000
Mean International Markets
No. of Firms
Total Sales ('000)
Sample Breakdown by Total Sales and International Markets
No. of Firms
International Markets
Number of international markets - secondary measure of internationalization success
20-Nov-09
11
Hypothesis ResultsModelBackground
Why size is not significant?
Results
SMEs
Large Firms
High flexibility
Low flexibilityASIAN
MARKET
Lower speed to market
Higher speed to market
Dynamism is more important in Asia
Possible Explanations
The Singapore Case
Strong government support for local firms to internationalize:
• International Enterprise Singapore
• Government Subsidy Schemes
• Trade Networking Groups
Hypothesis ResultsModelBackground
Hypotheses
Hypothesis
The bigger the firm, the higher is its
probabiliy to succeed internationally
Firm size matters up to a certain point
but not for others
Type of Relationship Expected Outcome
Continuous
Positive Linear
Discontinuous
Curvilinear
Results
FALSE
?
20-Nov-09
12
Hypothesis ResultsModelBackground
Framework
Results23
Solving the puzzle
1 Full Sample Regression
• Two measures of firm size are used: Total Sales and Total number of Employees
• All data points are included in the regression
2 Comparative Analysis
• Reviewing internationalization success in each sample group – by size
• Both definitions of firm size were reviewed
3 Subsample Regression
• Sample is divided by groups depending on size (<10mil, 10-100 mil, >100mil)
• Both definitions of firm size are reviewed,
Does firm size matter
to
internationalization
success?
Hypothesis ResultsModelBackground
Alternative Model 1 Sales Square
24
20-Nov-09
13
Hypothesis ResultsModelBackground
Alternative Model 1 Sales Square
25
Hypothesis ResultsModelBackground
Alternative Model 1 Sales Square
26
Scatter plot ALL Scatter plot ex >$1billion
20-Nov-09
14
Hypothesis ResultsModelBackground
Further Analysis
Results27
Regression by sub-samples
Firm Size Total SalesTotal Employees
< 10 mil ** -10 - 100 mil - -
>100 mil - **
Firm Size Total Sales Total Employees
< 10 mil ** -10 - 25 mil - **25 - 50 mil - -50 - 75 mil - -
75 - 100 mil - ->100 mil - **
Hypothesis ResultsModelBackground 28
Further Analysis
Total Sales is a statistically significant variable
• Amongst firms with Total Sales < $10 million, Total Sales is positively correlated with Internationalization Success
• RoA (+), Physical Distance (+) and Industry (-) are statistically significant as well
Subsample < $10 million
20-Nov-09
15
Hypothesis ResultsModelBackground 29
Further Analysis
Total Employees is a statistically significant variable
• Amongst firms with Total Sales > $100 million, Total Employees is positively correlated with Internationalization Success
• RoA (-) and Physical Distance (+) are statistically significant as well
• The negative value of RoAcoefficient is unexpected
Subsample > $100 million
Hypothesis ResultsModelBackground
Further Analysis
Results30
Regression by sub-samples
Very Small
Middle
Very Large
Total Sales
Total Employees
None
Firm Size Variable** Explanation
• Costly external financing
• Reliant on internal sources
• Insufficient scale of sales
• Highly contingent conditions for middle-sized firms
• Both internal and external financing are possible
• Constraint for internationalization would be
managerial resources � total number of employees
20-Nov-09
16
Hypothesis ResultsModelBackground
Further Analysis
Results31
Regression by sub-samples
Financing
sources
Internal
External
• Unequal access to financial resources
• Differentiated outcome
Internationalization
Success
Retained earnings
Loans, bonds & investments
Hypothesis ResultsModelBackground
Limitations
Results32
1. Singapore-only dataset – not representative of the region2. Missing fields – led to datapoints being dropped3. Generalizations:
• Markets are defined as regions• Physical distance are taken as euclidian distance
4. Internationalization success need not be measurable by export intensity
20-Nov-09
17
Hypothesis ResultsModelBackground
Conclusions
Results33
1 Firm size as measured by Total Sales or Total Employees are not statistically
significant factors in influencing internationalization success
• No clear positive linear relationship was observed
• Thus, size should not be a barrier to internationalization (Calof 1994)
2 Firm size, however, seems to have an impact when the firm either too small
or very large, but the significant independent variable differ in the two cases• Total Sales matters for very small firms
• Total Employees matter for very large firms
Hypothesis ResultsModelBackground
The impact of size on internationalization
Q & A
34
20-Nov-09
18
Hypothesis ResultsModelBackground Model
Variable Map
Internationalization
Success
Market
Experience
Management
Experience
Domestic
Knowledge Base
Physical Distance
Cultural DistanceInformation
Advantage
Resource
Advantage
Resource
advantage
Hypothesis ResultsModelBackground
Correlation Matrix
36
Success TotalSales Employees FirmAge Markets RoACulturalDistance
PhysicalDistance Industry
Success Pearson Correlation 1 .050 .114 -.038 .234**
-.182**
.083 .557**
.127Sig. (2-tailed) .451 .083 .586 .000 .005 .207 .000 .052N 235 234 234 212 235 233 232 235 235
TotalSales Pearson Correlation .050 1 .776**
.066 -.019 .084 .053 .126*
.052Sig. (2-tailed) .451 .000 .328 .766 .195 .410 .050 .417N 234 243 242 220 241 241 240 243 243
Employees Pearson Correlation .114 .776**
1 .074 -.026 .095 -.017 .152*
.082Sig. (2-tailed) .083 .000 .276 .683 .140 .787 .018 .204N 234 242 244 221 241 242 241 244 244
FirmAge Pearson Correlation -.038 .066 .074 1 .038 .094 -.025 -.077 -.048Sig. (2-tailed) .586 .328 .276 .579 .166 .716 .253 .479N 212 220 221 222 219 221 219 222 222
Markets Pearson Correlation .234**
-.019 -.026 .038 1 -.059 -.015 .204**
-.051Sig. (2-tailed) .000 .766 .683 .579 .366 .819 .001 .429N 235 241 241 219 242 240 239 242 242
RoA Pearson Correlation -.182**
.084 .095 .094 -.059 1 -.004 -.130*
-.123Sig. (2-tailed) .005 .195 .140 .166 .366 .948 .043 .055N 233 241 242 221 240 243 240 243 243
CulturalDistance Pearson Correlation .083 .053 -.017 -.025 -.015 -.004 1 .230**
-.100Sig. (2-tailed) .207 .410 .787 .716 .819 .948 .000 .120N 232 240 241 219 239 240 242 242 242
PhysicalDistancePearson Correlation .557**
.126*
.152*
-.077 .204**
-.130*
.230**
1 .088Sig. (2-tailed) .000 .050 .018 .253 .001 .043 .000 .169N 235 243 244 222 242 243 242 245 245
Industry Pearson Correlation .127 .052 .082 -.048 -.051 -.123 -.100 .088 1Sig. (2-tailed) .052 .417 .204 .479 .429 .055 .120 .169N 235 243 244 222 242 243 242 245 245