In Search of New Relationship between Internationalization and Firm Performance: A ‘Test of Concept’ Based on Financial Statement Data from Austrian-Listed Companies

This paper aims to explore the issue of inconsistent relationship between firm internationalization and firm performance in IB research. Recent meta-analysis of empirical internationalization research on the relationship between internationalization and firm performance shows no consensus about the direction and magnitude of this relationship. These are surprising results since extant internationalization models and theories assume a myriad of positive effects such as knowledge spillovers, cost advantage and cost efficiency, economy of scale and organization learning and portfolio and risk diversification. Following the above criticism, this paper provides a different way of measuring the impact of internationalization on firm performance. The group comparison of multi-national and international companies based on financial data show that the reasons for internationalization are not cost advantages, economies of scale or others frequently mentioned in internationalization research. Instead, this paper identifies an effects of internationalization, which is labeled financing advantage. MNEs can generate disproportional higher revenue growth and higher cash flows than IEs. Therefore, they have more equity capital to invest and are thus not exposed to interest change risks to finance growth.