Performance Following Changes of International Presence in Domestic and Transition Industries
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*Will Mitchell is Associate Professorof CorporateStrategy,Myles Shaver is doctoralcandidateof InternationalBusiness,andBernardYeungis AssociateProfessorof InternationalBusiness.All authorsarein the School of BusinessAdministrationat the Universityof Michigan. A nontechnical summary of this paper was presented at the 1991 meetings of the Strategic Management Society, Toronto, October 25, 1991 and subsequently published as "Cambiare strategia internazionale: Difficolta per le aziende nazionali, in transizione e globali," in Maruizio Bussolo and Stefano Zara, editors, Coinpetizione multidimnensionale:Quale azienda globale?, 211-34, Torino, Italy: ISEDI, 1992. This paper was presented at the 1992 AIB meetings in Brussels. We appreciate comments received at both conferences. We are also grateful for comments provided by the referees of this journal and the encouragement of the editor, Paul Beamish. Received: May 1992; Revised: January & April 1993; Accepted: April 1993.
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JOURNAL OF INTERNATIONALBUSINESS STUDIES, FOURTH QUARTER 1993
help firms succeed or contribute to their failure following international expansion. In this paper, we examine the incidence of international expansion and retrenchment, along with the association between changed international presence andfirm performance.We examine two types of industries:industries in which national markets consisted primarily of local competitors throughout the period of the study, and industries in which foreign firms began to take substantial positions in national markets. In the former industries, firms that possessed internationaloperations had no average market share advantage over companies that were primarily domestically based. In the latter industries, by contrast, internationaloperations began to be associated with greater market share during the study period. We refer to such cases as domestic and transitionindustries, respectively. The domestic and transition industry classifications undoubtedly mask many importantnuances concerning changing competitive factors. Nonetheless, the categories are based on key differences among industries in the evolution of the advantage of international operations. Our study of the domestic and transition cases stands in contrast to earlier studies of expansion and performance in global industries, where many advantages of possessing international operations have been captured by firms that have already expanded. We expect expansion to be less risky in domestic and transition industries than in global industries. In contrast with studies finding that firms often suffer following internationalexpansion, we predict that many companies will benefit following internationalexpansion in domestic and transition industries, particularly in the latter case. To test the predictions, we examine thirty-five American firms operating in five medical sector industries between
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