Abstract
To date international management studies have found mixed results on the relationship between multinationality and performance. We address the multinationality–performance relationship by exploring the concept of conformity in multinationality, which expresses the extent to which a firm’s multinationality resembles the multinationality of its peers at a particular point in time. Our results show that, ceteris paribus, the best performing firms are those with high levels of conformity in multinationality to the strategic group peers as well as those with high levels of conformity to the market leader. Hypotheses are tested with data on the conformity in multinationality of 61 Italian ceramic tile manufacturers in the 2005–2009 time period.
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Notes
‘Competitive risk reduction’ refers to a firm’s attempt to maintain competitive parity with rivals; hence, firms conform to maintain their relative competitive position vis-à-vis peers. ‘Mitigation of rivalry’ refers to a firm’s attempt to reduce the likelihood of aggressive responses by rivals; hence, firms conform to avoid competitive warfare with rivals (Lieberman and Asaba 2006).
It is worth noting that we identify the market leader at the home-country industry level, and not at the strategic group level. The fact that Marazzi is a key player exercising influence on all the other industry rivals was corroborated by both interviews with managers and articles in national newspapers and special interest magazines published over our observation period (e.g., 2005–2009). Regardless of its product positioning (i.e., its strategic group), Marazzi was widely regarded as the world leader in the ceramic tile industry over our observation period. Its widely advertised performance both at the home country- and worldwide-level made its internationalization strategy highly visible and continuously scrutinized by all home-country rivals.
With regard to the measures of value chain expansion into specific geographic areas, data were collected from CER—il giornale della ceramica. Data not reported on CER were generously provided by Confindustria Ceramica, which is involved in the statistical surveys published on the special interest magazine. For each tile manufacturer, CER provides data on the number of showrooms and warehouses only for four macro-areas: Europe, North America, China and the rest of the world. The emphasis on Europe, North America and China derives from the fact that Italian tile manufacturers have expanded mainly in those areas over the last decade. Focusing on macro-areas is consistent with previous international management research. Indeed, scholars have emphasized the importance of measuring multinationality also in terms of the extent to which a firm has assets in macro-geographic areas that present within-area similarities, but between-areas differences (Lampel and Giachetti 2013; Qian et al. 2010).
This scaled difference captures the distance between a focal firm’s strategy and the strategy of the reference target. For example, suppose that at time t the focal firm i has two warehouses in North America, while the reference target has three. The absolute difference is one. Suppose at time t + 1 the focal firm adds one warehouse in North America, while the reference target remains with three. The absolute difference becomes zero. This is a case in which the focal firm i has increased its level of conformity from year t to year t + 1.
Some firms entered the market after 2005, while other shut their operations before 2009.
In order to compare the regression coefficients and, thus, assess the relative magnitude of predictors’ effect on firm performance, we repeated the analyses in Model 2 and 4 by standardizing all the independent variables. We found that the coefficients of conformity to the strategic group (Model 2) and conformity to the market leader (Model 4) are, respectively, 0.016 and 0.020, thus indicating a similar effect size. Moreover, in Model 2, the coefficients of firm size, degree of vertical integration, debt-to-equity ratio, firm age, firm risk, and firm growth are, respectively, 0.051, −0.011, −0.003, −0.217, −0.004, −0.023. In Model 4, the coefficients of firm size, degree of vertical integration, debt-to-equity ratio, firm age, firm risk, and firm growth are, respectively, 0.104, −0.011, −0.002, −0.161, −0.004, −0.026. These results show that the effect of CIM on ROA is not negligible.
The reader will note that this model differs from Model 1 in terms of number of observations (232 instead of 236).
In our sample, the 90th percentile of total assets is approximately equal to 500 million euro.
Most of the ceramic tile manufacturers, as well as many ‘satellite’ firms (e.g., suppliers), are located in the municipalities of Sassuolo, Fiorano Modese, and Casalgrande, which together are commonly defined as the core of the cluster.
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Acknowledgements
We gratefully acknowledge the excellent guidance provided by the Editor Michael-Jörg Oesterle and the two anonymous reviewers, who helped strengthen this paper. We thank Timothy Folta and Tatiana Kostova for their thoughtful feedback on earlier drafts of this paper. We also thank Tiziano Bursi, Luca Luberto, and Gianluca Marchi for providing insights on the Italian ceramic tile industry. Finally, we appreciate the comments by seminar participants at Ca’ Foscari University of Venice and University of South Carolina, and by paper session participants at the 2012 Academy of Management Annual Meeting and 2013 Academy of International Business Annual Meeting.
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Giachetti, C., Spadafora, E. Conformity or Nonconformity in Multinationality? Performance Implications for the Italian Ceramic Tile Manufacturers. Manag Int Rev 57, 683–715 (2017). https://doi.org/10.1007/s11575-017-0316-0
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DOI: https://doi.org/10.1007/s11575-017-0316-0