How Do We Capture "Global Specialization" When Measuring Firms' Degree of Internationalization?

The IB literature informs us of several ways to measure firms' degree of internationalization. In this paper we make the argument that in fact none of the existing indices really measure firms' degree of "global specialization", that is, to what extent their allocation of resources is multidomestic or global. As argued, all the existing measures may gauge a purely multidomestic firm as having a high degree of internationalization, whereas a truly global firm may be ranked low. In order to remedy this we introduce a complementary index measuring how firms are configuring their value chains - whether they are replicating value chain activities from country to country or locating them in globally specialized units in order to exploit an international division of labor. In addition to mathematical modeling and numerical examples, we examine the relevance of the new index of global specialization on data of Danish MNCs by looking at the correlation between the new global specialization index and existing indices of firms' degree of internationalization. We find that the index is able to identify a distinct group of firms with significantly higher degrees of global value chain configuration.