Local, Regional or Global: Geographic Orientation and Relative Financial Performance of Emerging Market Multinational Enterprises

Abstract

We extend the regional/global strategies literature by analyzing the relative performance of emerging market (EM) multinational enterprises (MNEs) based on their geographic orientation. We develop a framework showing that firms adopt three geographic orientations - local, regional, and global - and test our framework with the market penetration strategies (sales) of 701 MNEs from 28 EMs during 2000-2006. Our analysis shows that distinguishing among these three geographic segments is important, as not all of these geographic segments enhance firms' financial performance relative to their industry: a combination of local and global orientations enhances while regional orientation reduces the relative financial performance of EM MNEs.

Keywords: geographic orientations, regional/global strategies, performance, emerging markets, multinationals

JEL Classification: F23