Dissertation: What makes company a winner in globalization?
Many “anti-globalists” think that globalization is a scam. They also question the bliss of free trade. Some have claimed that globalization and unfair competition from foreigners has destroyed jobs at home. Globalization undoubtedly has its losers, but under key firm-specific advantages such as patents, trademark, and brand image the companies become winners?
A new doctoral study from the University of Vaasa reveals under which circumstances the companies can really benefit from globalization and internationalization.
A new doctoral study from the University of Vaasa reveals under which circumstances the companies can really benefit from globalization and internationalization.
Krishna Bhandari has analyzed panel data of Nordic large-cap and mid-cap companies and researched the relationship between internationalization and sustainable performance. The sustainable performance is measured over 10 years with return on assets (total) and Tobin’s Q (market value divided by book value).
Bhandari’s research suggests that the internationalization is beneficial only between certain thresholds.
“The sweet spot is to have an optimum level of internationalization between 10 to 75 percent”, says Bhandari who will defend his doctoral thesis on Tuesday, 15th of August.
For example, for the Nordic firms that have less than 10 percent sales from foreign markets or for that matter larger than 75 percent foreign sales may not benefit from internationalization in the long run. According to Bhandari, this is because managers maximize their own personal benefits in the expense of shareholder’s benefits. Also, managing across countries and specially having high level of liabilities of foreignness reduces the benefits of internationalization in the last tier of expansion.
The impact of internationalization becomes larger on long term performance if the firm possesses firm-specific advantages, such as patents, trademarks, and brand reputation or follows the right strategic choices such as cost, differentiation, and hybrid strategies.
How to avoid success trap?
The second major finding of the dissertation provides a plausible solution for an “Innovator’s Dilemma”, a ground-breaking book by Harvard University professor Clayton Christensen. Firms should be “ambidextrous” in reaping short-term profits, called exploitation; and innovating for long-term success, called exploration at the same time. The term “ambidexterity” means balancing both efficiency and innovation at the same time.
If the ratio between exploration and exploitation is in the very low range or very high range, it is not beneficial for the firm. However, gaining an optimum range in the middle helps firms to avoid success trap or in that matter exploitation trap. Such a trap exists due to the relentless pursuit for profits in the expense of innovation and experimentation for new products and services. Following overall cost leadership, however, did not have impact when balancing exploration and exploitation but differentiation and hybrid strategies were important.
System GMM and computer-aided text analysis were used to analyze a panel data of Nordic large-cap and mid-cap companies.
According to Mr. Bhandari, managers can benefit by allocating resources for internationalization and innovation on the optimum range suggested by the model of internationalization developed in the thesis. Policy makers can benefit in tuning the competition and innovation policies simultaneously in the national level as these policies are always in a trade-off.
Further information
Krishna Raj Bhandari, tel. +358 440526711, email krishna.finland(at)gmail.com
Bhandari, Krishna (2017). Internationalization and Organizational Ambidexterity for Sustainable Performance: Moderating Effects of Firm-specific Advantages and Competitive Strategies, Acta Wasaensia 379, Vaasan yliopisto, University of Vaasa.
Krishna Bhandari was born in 1971 in Nepal. He did his Bachelor of Engineering (Electrical) at PEC University of Technology in Chandigarh, India and Master of Business Administration at Asian Institute of Technology in Bangkok, Thailand. Mr Bhandari is a Finnish citizen and currently lives in Helsinki with his family. Before his doctoral studies at the University of Vaasa he has been a mentor for several Finnish startups and worked five years as Senior Business Consultant/Project Manager for Nokia.
Public Defence
The public examination of Krishna Bhandari’s doctoral dissertation “Internationalization and Organizational Ambidexterity for Sustainable Performance: Moderating Effects of Firm-Specific Advantages and Competitive Strategies” will be held on Tuesday 15 August at 12 o´clock in auditorium Kurtén (C203, Tervahovi). The field of dissertation is Marketing.
Professor Sami Saarenketo (Lappeenranta University of Technology) will act as opponent and Professor Jorma Larimo as custos. The examination will be held in English.
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