Correlation Between Internationalization Of Firms And Their Performance

Under the circumstances of economic globalization, Chinese manufacturing firms are confronted with a worldwide competition. It's an inevitable trend for them to carry out internationalization strategy and it's also an inevitable choice when they develop to certain phases. Whether international operation can bring a good performance or not become a topic of common concern. For this problem, some scholars believe that the international operations can improve firm performance and reduce risk; others has also proved that the international strategy can't improve the performance. However, more and more studies show: Compared with the domestic business, international operations can improve firm performance.What's the relationship internationalization of Chinese manufacturing firms between their performance? To answer this qusetion, we use a sample of Chinese manufacturing listed companies during the 2004-2006 periods to explore the relation between performance and degree of internationalizaion measured by export sales ratio. Through the empirical study, we get the following results: firstly, seen from the whole aspect, the degree of internationalization of manufacturing firms is low and now the pattern of most firms is exporting. But the degree of internationalizaion is different in each industry. Secondly, there is a positive correlation between the degree of internationalizaion and performance. Thirdly, as diversification is also a way of corporate expansion like internationalization. We sort the sample by the different choice on diversifacation and internationalization, and examine the mutual effect of diversification and internationalization on firm perofmance. The result shows that the effect of internationalization on performance is different when the firm has the different choice on diversification. The firms which just take internationalization can bring more earning. And the firms take diversification and internationalization at the same time will destory their performance, but their performance are better than the firms that just take diversification.