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

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    Abstract

    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.
    Original languageEnglish
    Place of PublicationFrederiksberg
    PublisherInstitut for Strategic Management and Globalization
    Number of pages34
    ISBN (Print)8791815088
    Publication statusPublished - 2005
    SeriesSMG Working Paper
    Number7/2005

    Keywords

    • Internationalization
    • Value chain
    • Global configuration

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