Journal of Business Research 67 (2014) 1243–1248

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Journal of Business Research

Moderators on international diversification of advanced emergingmarket firms☆

Huei-Ting Tsai ⁎National Cheng Kung University, Taiwan

☆ The author thanks Professor Yung-Ming Shiu at NatJBR reviewers for reading and comments of an early ve⁎ National Cheng KungUniversity, Department of Busin

Road, Tainan City, Taiwan. Tel.: +886 6 2757575; fax: +E-mail address: httsai@mail.ncku.edu.tw.

0148-2963/$ – see front matter © 2013 Elsevier Inc. Allhttp://dx.doi.org/10.1016/j.jbusres.2013.04.006

a b s t r a c t

a r t i c l e i n f o

Article history:Received 5 March 2012Received in revised form 27 March 2013Accepted 11 April 2013Available online 6 May 2013

Keywords:InternationalizationR&D intensityLearning capabilityAdvance emerging markets

Firms from advanced emerging markets are becoming notable players in the global marketplace. This studyseeks to examine how these firms expand to international markets successfully. Drawing on R&D intensityand learning capability, this study finds that an s-shaped relationship exists between firm internationalizationand performance. The results also show that R&D intensity and learning capability significantly strengthen theimpact of internationalization on firm performance. These results imply that R&D intensity and learning capa-bility are the main drivers of success for firms from advanced emerging markets in foreign markets.

© 2013 Elsevier Inc. All rights reserved.

1. Introduction

This study investigates the relationship between internationalizationand performance for multinational enterprises (MNEs) from advancedemerging markets (FTSE classification, 2012). While previous studies ex-tensively examine this issue, they suffer from three main problems. First,there is no consensus on the shape of the relationship between a firm'sinternationalization and its performance. Past studies have proposed alinear relationship (Delios & Beamish, 1999; Tallman & Li, 1996),U-shaped (Lu & Beamish, 2001; Ruigrok & Wagner, 2003; Thomas,2006), inverted U-shaped (Elango, 2006; Gomes & Ramaswamy, 1999)and S-shaped ones (Contractor, Kunda, & Hsu, 2003; Johnson, Yin, &Tsai, 2009; Lu & Beamish, 2004). Second, researchers have made littleeffort to identify the factors that play a critical role in moderating therelationship between internationalization and performance. While priorstudies suggests that product diversity (Hitt, Hoskisson, & Ireland,1994), innovation strategies (Kotabe, Srinivasan, & Aulakh, 2002), mar-keting and R&D intensity (Barsch & Krist, 2007; Lu & Beamish, 2004)are important moderators in the internationalization and performancerelationship, this paper considers that other factors are also significant.Third, previous studies focus on MNE behavior from the triad economiesin the context of emerging economies (Ramamurti, 2004), with only afew studies specifically examining this issue for firms from emergingmarkets (Contractor, Kunmar, & Kundu, 2007; Elango, 2006; Thomas,2006). A better understanding of how such firms expand globally isvital for both academics and practitioners (London & Hart, 2004).

ional Chengchi University andrsion of this paper.ess Administration, 1 University886 6 2080179.

rights reserved.

This paper attempts to fill gaps in the previous research by examiningthe internationalization–performance relationship of advanced emergingmarket firms. In particular, it addresses the following two questions: (1)what is the relationship between internationalization and performancefor firms from advanced emerging markets? (2) What factors moderatethis relationship in addition to those previously identified?

Using data from the top 200 firms from Taiwan, this paper finds thatthe internationalization–performance relationship is non-linear. A firm'sR&D intensity and learning capability moderate the internationalizationand performance relationship. In other words, a firm's mere presencein international markets does not automatically lead to superior perfor-mance, and its multinational efforts must be coupled with its stronglearning ability to produce satisfactory economic outcomes.

The rest of this paper is structured as follows. First, this paper reviewsthe major findings of previous studies on the internationalization–performance relationship. Second, this paper develops a conceptualframework and presents the research hypotheses. Third, it discussesthe research methods and provides the empirical results. Finally, itprovides some conclusions along with managerial implications andsuggestions for future research.

2. Literature review

One can articulate the research on the shape of the internationaliza-tion–performance relationship as five strands of findings: (1) the linearand positive approach (Grant, 1987; Grant, Jammine and Thomas, 1988;Tallman & Li, 1996; Delios & Beamish, 1999), (2) the linear and negativeapproach (Geringer, Tallman, & Olsen, 2000; Denis, Denis and Yost,2002), (3) the U-shaped form Lu & Beamish, 2001; Ruigrok &Wagner, 2003; Capar & Kotabe, 2003; Thomas, 2006; Contractor etal., 2007), (4) the inverted U-shaped form (Geringer & Beamish,

H2 H3

H1Internationalization Performance

Moderator

R&D

Intensity

Moderator

Learning

Capability

Control Variables:

Firm Age, Firm Size,

Industry effect

Fig. 1. Conceptual framework.

1244 H.-T. Tsai / Journal of Business Research 67 (2014) 1243–1248

1989; Hitt et al., 1994; Sullivan, 1994; Hitt, Hoskisson, & Kim, 1997;Gomes & Ramaswamy, 1999; Elango, 2006), and (5) the S-shapedmodel (Contractor et al., 2003; Johnson et al., 2009; Lu & Beamish,2004; Thomas & Eden, 2004). The form of classification includes re-search in the context of developed and emerging markets.

The above literature provides an authorized understanding of theinternationalization and performance relationship, but they are not acomplete explanation of a firm's internationalization. Although manyprevious researchers discuss the advantages and disadvantages of inter-nationalization, they rely on a simplistic assumption that the calculationof the costs and benefits in the process of internationalization derivesthe shape of the internationalization–performance relationship. Thisapproach ignores the various intangible assets that exist with andamong firms, which result in different shapes of internationalization–performance relationship. It is thus unsurprising that there appears tobe no convergence regarding the shape of the internationalization–performance relationship in the literature.

Therefore, it is necessary to consider how a firm's distinctivecapabilities and intangible assets affect the relationship betweeninternationalization and performance. Several studies state that a firm'sassets and capabilities, such as product diversity,marketing and R&D in-tensity, are critical inmoderating the relationship between internation-alization and performance relationship (Barsch & Krist, 2007).Researchers that focus on product diversity posit that the strength ofthis diversity can moderate the internationalization–performance rela-tionship (Geringer et al., 2000; Hitt et al., 1997). Lu and Beamish (2004)also found that marketing intensity is critical in leveraging firm compe-tence in the process of internationalization.

With regard to R&D intensity, several studies find that it has a posi-tive relationship with firm performance (Capar & Kotabe, 2003). Re-search within this stream commonly also suggests that R&D ability isimportant in strengthening the relationship between internationaliza-tion and performance (Capar & Kotabe, 2003; Hitt et al., 1994). Thesestudies are especially helpful in providing insights into the relationshipbetween internationalization and performance, suggesting that a firm'sintangible assets influence the impact of internationalization on firmperformance.

Although the above literature shows that both firm capabilities andintangible assets are associated with superior firm performance in theprocess of internationalization, there is disagreement over what rolesthe variousmoderators play in the relationship. In addition, researchershave only focused on a fewvariables, such as product diversity, R&Dandmarketing intensity. Other assets and capabilities seem to attract littleresearch attention.

Several important insights arise from a review of the literature. First,the findings of these studies suggest that the internationalization–performance relationship is far more complex than commonly as-sumed because the firms' capabilities differentiate this relationship.Studies that fail to incorporate a firm's intangible assets and capabil-ities can thus lead to a wrong understanding about the shape of theinternationalization–performance relationship.

Second, there is a major problem embedded within theories aboutthe shape of the internationalization–performance relationship andtheories about the effect of moderators on this relationship. Withinthe dynamic global market, possessing static distinctive resources aloneis insufficient to ensure long-term economic returns in the process ofinternational expansion (Luo, 2000), and only firms with the ability tocreate sustainable competitive assets and advantages can achieve thisgoal. To truly capture the shape of the internationalization–performancerelationship, this study incorporates the concept of ‘learning capability’(Kogut & Zander, 1992), which refers to a firm's ability to continuouslylearn and develop new knowledge in geographic expansions, intothe investigation of the relationship between internationalizationand performance.

Thirdly, to the best of our knowledge, there are only a few studiesthat have examined the international performance of firms from

emerging markets (Tsai & Eisingerich, 2010), and many of these fo-cused on different aspects of this relationship to be considered here.For example, Aulakh, Kotabe and Teegen (2002) and Wan (1998)compared the differences in firm strategies in the context of devel-oped and developing markets for firms from emerging markets.Other scholars focused on the external factors that influencethe internationalization–performance relationship, such as social net-work (Zhou & Luo, 2007) and the quality of governance of the homecountry (Elango, 2006). There is thus a need for further research onthe internal factors of a firm affecting the internationalization–perfor-mance relationship in the context of emerging markets.

To shed some light on these points, this study proposes a conceptualframework and research hypotheses in the next section.

3. Theory

Fig. 1 illustrates the conceptual framework used in this work, whichcomprises four theoretical links. Firm performance is shaped primarilyby the degree of internationalization. With the degree of geographic ex-pansion, firm performance can be shaped by the advantages and disad-vantages of firm internationalization (H1). The relationship betweeninternationalization and performance is also affected by R&D intensity(H2) and learning capability (H3) because these are believed to affectfirmperformance in the process of internationalization. Therefore, with-in this study, firm age is employed as a control variable.More theoreticalconstructs are presented as follows.

3.1. The S-shaped relationship

This study posits that there is an S-shaped relationship betweeninternationalization and firm performance. As noted in the previoussection, a firm needs some time to learn and develop its unique assetsand capabilities and thus the returns of these assets and abilities willbe postponed until a later stage of internationalization. R&D invest-ments, for example, have a negative impact on short-run performance,because it takes some time to develop the advantages of R&D, and costsare often incurred well in advance of benefits in an early stage of inter-nationalization, with the returns from investments in intangible assetsbeing better captured in long-term performance (Thomas & Eden,2004). This explains the negative performance that is often seen inthe early stage of internationalization, and the positive performance atthe medium levels of internationalization. However, over-expansionmay harm firm performance again when the complexity of managingforeign operations increaseswith the degree of further internationaliza-tion (Contractor et al., 2003), as the costs of operating the enterprises

1245H.-T. Tsai / Journal of Business Research 67 (2014) 1243–1248

come to outweigh the returns at this stage. Based on the above discus-sion, this paper proposes the following hypothesis.

H1. There is a significant relationship between internationalizationand performance. The relationship between internationalization will beS-shaped, with a negative slope of firm performance at a low level of geo-graphic diversification, a positive one at medium levels of geographicdiversification, and a negative one at high levels of geographic expansion.

3.2. R&D intensity

Numerous studies have demonstrated that innovative capabilitieshave a significant effect on technological progress or output perfor-mance (Capar & Kotabe, 2003; Hitt et al., 1994; Lu & Beamish, 2004).To clarify the impact of R&D intensity on the internationalization–performance relationship, R&D intensity within this study refers tothe ability to develop unique products and improve manufacturingmethods, both of which have received considerable attention in theinternational management literature.

R&D intensity is likely to reflect the abilities to design unique productsand improve product quality, because these derive from the innovativecapabilities of firms. A firm's technological competence can facilitate thedevelopment of unique products, and hence firmswith better R&D abilityaremore likely to produce unique products development to serve specificmarkets worldwide, giving rise to increased market share and salesgrowth (Oviatt & McDougall, 1994).

R&D intensity also refers to the ability to improve or develop newmethods of doing business (Dosi, 1988; Nelson & Winter, 1982).Lewin and Massini (2003) proposed that firms with better innovationprocesses have more highly developed technology-creation routinesand learning regimes, which can help them to offer new productsmore efficiently and quickly than their rivals. That is, R&D ability facili-tates the creation of superior products and the improvement of existingproducts, as well as leading to greater effectiveness and efficiency inproduction processes (Knight & Cavusgil, 2004). In short, advances inproduction technologies facilitate low-cost manufacturing methodsthat enable firms to efficiently serve the specialized needs of marketniches worldwide.

In short, firms with a superior R&D ability create products and ad-vance operating methods that improve organizational performance(Lumpkin & Dess, 1996; Miller & Friesen, 1984; Zahra, Ireland, &Hitt, 2000), and thus R&D intensity has significant effects on firm per-formance in competitive international markets (Kotabe, 1990; Miller& Friesen, 1984; Zahra et al., 2000), and is expected to reinforce theimpact of internationalization on firm performance.

H2. The impact of internationalization on firm performance will bestronger for firms with higher R&D intensity than those with lower R&Dintensity.

3.3. Learning capability

Learning capability is important for firms that aim to obtain sustain-able competitive advantages and ensure long-term economic returns(Kogut & Zander, 1992), and these capabilities can also offset the liabil-ities of foreignness during international expansion (Zaheer, 1995). Firmswith high levels of learning capability should be more open to gain andthen benefit from experiences that arise in different situations, whichmakes them more likely to do business abroad than more defensivefirms that adopt a static resources strategy. Therefore, a strong learningcapability is closely associated with superior firm performance in theprocess of internationalization. The hypothesis is as follows:

H3. The impact of internationalization on firm performance will bestronger for firms with higher levels of learning capability than thosewith lower levels of learning capability.

4. Method

This study examines the foreign expansion of Taiwanese firms. Sincethe aim is to examine the relationship between internationalization andperformance for firms fromemerging economies, Taiwanwas an appro-priate setting for testing the proposed research hypotheses. The largest200 companies were identified in terms of their revenue according toBusiness Weekly magazine.

The choice of Taiwan is appropriate for the following reasons. First,many Taiwanese firms have expanded internationally for at least threedecades, and several of them are now becoming major players in theglobal business, such as Acer andHTC. Thus, Taiwan provides an excellentopportunity to study the internationalization for firms from advancedemerging markets. Second, Taiwan is a relatively well-developed emerg-ing economy.We adopt the updated classification published by FinancialTimes on September in 2012, which defines Taiwan as the advancedemerging market. Compared to other advanced emerging markets, suchas South Korea, Taiwanese firms did not suffer from serious economicerosion during the Asiafinancial crisis of the late 1990s, and have demon-strated that they have better mechanisms to deal with the complexitiesand difficulties associated with internationalization than firms fromother advanced emerging markets. Therefore, it is anticipated that theresults of this study of Taiwanese firms can help companies from otheradvanced emerging markets to learn more about internationalization.

To compile the sample, the author collected original data for about 200firms from the annual reports in 2011. Under Taiwanese law,firms are re-quired to provide data on sales, assets, employees, net incomes, foreignsales and other detailed financial information to investors in their annualreports. This means that nearly complete information on the foreign ex-pansion of these firms is available for use by this study. Since this studyfocuses on internationalization, the authors also removed firms withoutforeign sales or geographic expansions from the sample. The resultingsample consisted of 155 firms.

4.1. Measures

4.1.1. Degree of InternationalizationConsistent with themajority of previous studies and due to the avail-

ability of data (Gomes & Ramaswamy, 1999; Grant, 1987; Tallman & Li,1996), the degree of internationalization is measured as the ratio offoreign sales to total sales (FSTS).

4.1.2. Firm performanceThe dependent variable is corporate performance. This paper used

both market- and accounting-based financial performance measures.The former is ROA (Return on Assets), computed as the ratio of net in-come to total assets. The market-based financial performance measureis EPS (Earning per Share), a company's net profits divided by the totalnumber of shares outstanding (Ruigrok & Wagner, 2003; Kim and Lyn,1990). Both ROA and EPS are used to measure firm performance andthe choice of these two measures is due to data availability.

4.1.3. Intangible assetsIntangible assets are measured by R&D intensity and learning capa-

bility. The former is defined as the annual expenditure on R&D dividedby sales. Learning capability is closely related to the quality of employeeeducational background because it relies on the human assets of a firm(Luo, 2000). In addition, organizational capabilities emerge throughthe integration of specialist knowledge across a number of individuals(Grant, 1987; Teece & Pisano, 1994). Organizational ability is accu-mulated through the integration of individual knowledge; therefore,the firm's learning ability is influenced by the quality of its employees'education background. Therefore, learning capability is defined as thenumber of employees with master's and PhD degrees, divided by thetotal number of employees.

Table 2Correlations matrix.

ROA DOI Learning R&D Firmage

Firmsize

Industrytype

ROA 1.00DOI 0.21 1.00Learning 0.26 0.14 1.00R&D 0.01 −0.01 0.47 1.00Firm age −0.16 −0.29 −0.40 −0.30 1.00Firm size 0.08 −0.04 0.03 −0.03 0.14 1.00Industry TYPE 0.03 0.37 0.36 0.28 −0.16 −0.05 1.00

Table 3Regression results.

Model 1 Model 2 Model 3 Model 4 Model 5 Model 6

Intercept −7.62(0.05)⁎

0.10(0.98)

−1.18(0.79)

−1.10(0.83)

−3.99(0.35)

−5.15(0.18)

DOI 0.47(0.03)⁎

0.04(0.05)⁎

0.11(0.17)

0.01(0.59)

0.09(0.00)⁎⁎⁎

0.10(0.00)⁎⁎⁎

Industry 0.02(0.98)

−2.80(0.01)⁎⁎

−2.80(0.01)⁎⁎

−2.81(0.012)⁎⁎

−3.32(0.00)⁎⁎⁎

−2.79(0.00)⁎⁎⁎

Firm size 0.64(0.06)⁎

0.68(0.03)⁎⁎

0.63(0.046)⁎⁎

0.63(0.048)⁎⁎

0.69(0.02)⁎⁎

0.63(0.02)⁎⁎

Firm age −4.58(0.02)

−2.15(0.00)⁎⁎⁎

−2.15(0.01)⁎⁎

−2.16(0.01)⁎⁎

−1.98(0.00)⁎⁎⁎

−1.59(0.02)⁎⁎

R&D 0.03(0.83)

0.05(0.69)

0.06(0.69)

1.53(0.01)⁎⁎

0.25(0.05)⁎⁎

1246 H.-T. Tsai / Journal of Business Research 67 (2014) 1243–1248

4.1.4. Control variablesThe effect of industry membership on firm performance has been

confirmed by previous studies (Contractor et al., 2003). Given the factthat Taiwan is a leading player in the high-tech industry, many firmswithin the sample are in technology-related industries. Based on thischaracteristic, we controlled for industry effects by using an industrydummy, which was one for technology-related industries and zero for allothers. Research also indicates thatfirm size and agemaypartially explainthe variance in firm performance in international markets (Decarolis &Deeds, 1999). We thus use firm size as one of our control variables, mea-sured as the logarithm of total sales (Gomes & Ramaswamy, 1999).

4.2. Analysis

To test the non-linear hypothesis, three regression equations wereused. To test for curvilinearity, the squared and cubic terms of DOIwere gradually entered into the baseline model. We also lagged ourexplanatory variables in order to mitigate the problems of endogenityin our analysis. To test the hypothesis that the impact of internation-alization can be moderated by intangible assets, this study ran thefollowing two regression models: (1) model with the main effect only,and (2) model with the main effect and interaction effects of intangibleassets. These hypotheses will be supported if the interaction effects sig-nificantly increase the explanatory power of the model.

4.3. Results

Table 1 reports the means, standard deviations, and correlationsfor the variables used in the study, while Table 2 presents the correla-tionsmatrix. The variance inflating factors (VIF) and tolerances for indi-vidual variables were all within adequate parameters. Table 3 presentsthe regression results.

Model 4 in Table 3 investigates all three DOI-based measures andcaptures the full non-linear effect of DOI on firm performance. The curvi-linear variable turns out to be significant and the model of fit was im-proved from an adjusted R2 at 26% to 28%. However, the signs of thethree DOI-basedmeasures indicate the existence of an S-shaped relation-ship, with those of DOI and DOI3 being negative, whereas that of DOI2 ispositive, thus supporting H1.

Model 2 is the full model which includes all measures and variableshypothesized to directly affect firm performance, including learningcapability, R&D intensity, and the three control variables. The resultsshow that learning capability is highly significant, indicating that afirm's ability to learn in the international environment is able to im-prove its performance, thus supporting H3.

The variable of learning capability is significantly and positivelyrelated to firm performance, but there is no statistically significant re-lationship between R&D intensity and firm performance, and thus H2is not supported.

The interaction between internationalization and R&D intensity ispositive and significant inmodel 5, while that between international ex-pansion and learning capability is positively and significant in model 6.These results support H2 and H3. In particular, the interaction effect of

Table 1Descriptive statistics.

Variables N Mean Std. dev

ROA 154 7.38 9.19DOI 154 65.7 23.1Learning capacity 153 13.4 14.9R&D intensity 159 3.5 3.17Firm age 156 24.12 12.91Firm Size 155 43,578 58,926

learning capability and internationalization is very significantly relatedtofirmperformance (P b 0.05). The overallmodel of the interaction effectof internationalization and learning ability accounted for a very signifi-cant variance, 43%, in Model 6. Moreover, the model of the interactioneffect of internationalization and R&D intensity (Model 5) also shows asignificant variance of 32%. Therefore, firm performance appears to besignificantly related to the interaction effects of intangible assets, R&D in-tensity and learning ability. In sum, the interaction of learning ability andinternationalization, as well as the interaction of R&D intensity and inter-nationalization, appear to have significant moderating impacts on therelationship between internationalization and performance relationship.

5. Discussions

This study finds a curvilinear relationship between internationali-zation and performance for Taiwanese firms. Moreover, it also findsthat the characteristics of firms' intangible assets moderate the rela-tionship between internationalization and performance. Specifically,the results indicate that R&D intensity and learning capability havea huge impact on this relationship. These results explain how firmheterogeneity strengthens the impact of internationalization on firmperformance.

This study examines the relationship between learning capabilityand firm performance in the process of internationalization. The

Learning 0.09(0.00)⁎⁎⁎

0.09(0.00)⁎⁎⁎

0.09(0.01)⁎⁎

0.08(0.00)⁎⁎⁎

0.54(0.00)⁎⁎⁎

DOI2 −0.00(0.37)

−0.01(0.06)⁎

DOI3 0.02(0.07)⁎

DOI⁎(R&D) 0.021(0.01)⁎⁎

DOI⁎learning 0.01(0.00)⁎⁎⁎

Adjusted R2 0.05 0.26 0.27 0.28 0.32 0.43

⁎⁎⁎ P b 0.01.⁎⁎ P b 0.05.⁎ P b 0.1.

1247H.-T. Tsai / Journal of Business Research 67 (2014) 1243–1248

resource-based view suggests that firms with inimitable knowledgeare likely to outperform their competitors. Although it is widely ac-cepted that inimitable knowledge can lead to better organizationalcapabilities, there are few empirical studies of this issue. This workthus addresses an important gap in the literature by highlighting theimportance of learning capability and also empirically supporting thedirect and interacting effects that it has on firm performance in the pro-cess of internationalization. This indicates that successful in geographicexpansion depends not merely on possessing distinctive capabilities,but also on learning new knowledge and creating new capabilities.

This study has three implications that are important with regardto traditional wisdom in the international business literature. First, forAsian firms, strong R&D and learning capabilities are the key factorsthat can lead to superior performance during the process of internation-alization. More importantly, learning capability is highly significant tothe internationalization–performance relationship, and thus it is veryimportant for managers of firms from emerging economies to developthe ability to learn new knowledge continuously, so that they can per-form successful and sustained geographical expansions.

Secondly, this study adds to the existing knowledge about interna-tionalization for firms from advanced emerging economies by pre-senting evidence of an S-shaped internationalization–performancerelationship. Managers of such firms should thus be very cautiouswhen expanding aboard, as the performance of their firms will tendto suffer in the early stages of this process, although, if they persist,success is more likely in the second stage. However, performancemay then decline again if firms continue expanding internationallybeyond a certain point. This means that it is important for managersto develop and implement appropriate strategies in different stagesof internationalization, and also suggests that academics should carryout more work with regard to the shape of the internationalization–performance relationship for firms from advanced emerging markets.

Thirdly, the results of this study highlight the importance of in-tangible assets to firms' efforts to raise their global competenciesand expand abroad. In order to attain an ideal moderating effect,managers of firms should develop more training and education pro-grams for employees, and thus strengthen intangible assets of firmemployees.

This study has several limitations that suggest directions for fur-ther research. First, our empirical data is related to the sample speci-fications, which have some inherent weaknesses. The results of thisstudy may be highly industry-specific, since Taiwan is a leading play-er in the high-tech and OEM sectors, and this is reflected in the firmsexamined in this work. While the theoretical links articulated in theconceptual framework may apply to other industries, the sampleused in this study limits the external validity of the conclusions. Re-searchers should thus determine whether the findings hold equallywell for firms in other industries, and future studies should investi-gate the applicability of the conceptual framework presented in thiswork to other research settings.

6. Conclusions

The results of this study illustrate that the relationship betweeninternationalization and performance can be significantly moderatedby intangible assets. This highlights the need for managers to considerhow a firm's intangible assets leverage its competence and performancein the process of geographic expansion. By underscoring the impor-tance of a firm's capabilities to its performance in the process ofinternationalization, this work advances our understanding of therelationship between internationalization and performance. In par-ticular, while the literature rarely focuses on the role of learningcapability in this process, the results of this study indicate that ithas a significant impact on how successful a firm is in its efforts toexpand to other countries.

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