Measuring the Degree of Internationalization of a firm: A Comment
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JOURNAL OF INTERNATIONALBUSINESSSTUDIES, FIRST QUARTER1996
attempt to develop such an index is indeed noteworthy, it is constrained by several theoretical and methodological issues that limit its utility. In the spirit of spurringintellectual debate, this comment identifies some of the major issues that must be addressed if an index of internationalization is to be developed. The comment focusses on the utility of the index, the conceptual questions raised, and the methodological obstacles that need to be surmounted. These observations go beyond merely identifying the key issues associated with Sullivan's [1994] contribution to direct attention toward the nature of the internationalization construct and the range of problems that arise in the conceptual development of an index. CONCEPTUALIZING THE DEGREE OF INTERNATIONALIZATION The rationale for an aggregate index of the degree of internationalization is its potential to help explain critical antecedents and consequences of global expansion. Since it integrates several component variables, it is expected to perform better than many of the single-item measures utilized in prior studies. As Sullivan [1994] observes, the use of a "multi-itemscale, such as DOIINTS, is more likely to tap a broaderrange of valid content of the total meaning of the construct of a firm's DOI" (p. 337). While the use of multiple construct components reflects sound methodological practice, the choice of indicators must be theoretically defensible and must show common traits that justify aggregation. If these conditions are not met the resulting index would be susceptible to inflation or deflation due to conceptually irrelevant factors, a flaw that Sullivan [1994] suggests is common in single-item measures. The degree of internationalization index suggested by Sullivan comprises five variables used to measure three attributes of internationalization: a structural attribute, a performance attribute, and an attitudinal attribute. The five variables that make up the index are the ratio of foreign sales to total sales (FSTS), the ratio of foreign assets to total assets (FATA), proportion of overseas subsidiaries to total subsidiaries (OSTS), top managers' international experience (TMIE), and psychic dispersion of international operations (PDIO). The degree of internationalization (DOI INTS) is computed as follows: DOIINTs= FSTS + FATA + OSTS + TMIE + PDIO. Sullivan [1994] started with a set of nine variables and subjected them to itemtotal analysis and retained five "good" items that were necessary to obtain a satisfactory level of reliability.These five "good" items were factor analyzed and found to load on a single factor. The construction of the internationalization index as outlined above raises two very important issues. First, it is debatable whether or not the unidimensionality of the construct is theoretically justified.
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