ssrn-900522

What is a multinational corporation?
Classifying the degree of firm-level multinationality
Forthcoming in International Business Review
Raj Aggarwal1, Jenny Berrill2, Elaine Hutson3 and Colm Kearney4
December, 2010
The degree of firm-level multinationality is a key dimension that spans all theoretical frameworks,
levels of empirical analysis and domains of investigation in international business research. There
is, however, no agreed approach to defining or measuring firm-level multinationality. This is
reflected in inconsistent approaches to sample selection and empirical testing, and it has curtailed
the advancement of the discipline. We propose that instead of searching for the elusive, all-
encompassing definition of an MNC, international business scholars should instead agree on a
classification system for the degree of firm-level multinationality. We illustrate the advantages of
this approach by constructing a simple classification system that takes into account the firm’s
breadth and depth of multinational engagements. We illustrate our matrix of firm multinationality
by classifying a novel sample of over 1,000 firms from seven countries, and we demonstrate how
it can guide theory development and empirical testing. We also provide examples of potential
future research directions.
Contact details
1
Department of Finance, College of Business Administration, University of Akron, Ohio, United States. Tel: 330-972
7442, e-mail: [email protected].
2
Business School, Trinity College Dublin, Ireland. Tel: 353-1-8962632, Email: [email protected].
3
UCD Smurfit School of Business, University College Dublin, Ireland. Tel: 353-1-7168828, Fax: 353-1-2835482, e-
mail: [email protected], www.elainehutson.ie.
4
Business School and Institute for International Integration Studies, Trinity College Dublin, Ireland. Tel: 353-1-896
2688, e-mail: [email protected], www.internationalbusiness.ie.
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1. Introduction
The terms multinational company (MNC), multinational enterprise and transnational corporation
are widely and often interchangeably used by international business (IB) commentators and
scholars. MNCs are traditionally thought of as successful firms that have grown over many years
into large corporations that are international in their operations, vision and strategies. This was
certainly the case during most of the twentieth century because the prevailing technologies in
communications and transport were associated with economies of scale that curtailed the
internationalisation of small and medium-sized enterprises. Recent technological innovations,
particularly the advent of the internet, have removed many of these constraints, and scale is no
longer a critical requirement for multinationality. The emergence of ‘international new venture’
(INV) firms is testament to this phenomenon. In the modern business environment, firms
increasingly operate across national borders – by exporting and importing raw materials and
intermediate or finished products; by employing foreign capital, people and processes; and by
organising, coordinating, and controlling resources globally. While MNCs remain a central focus
of IB research, these developments have broadened research agendas and extended the range of
firms that qualify as MNCs.
Although many theoretical and operational definitions of MNC have been proposed, none has
become standard. Researchers have adopted pragmatic approaches to operationally defining the
MNC, relying on past usage, data availability and sub-discipline norms. MNCs have consequently
been defined on the basis of characteristics as diverse as the size of the firm by sales, the
proportion of foreign sales or foreign assets, the number of foreign subsidiaries, and the number of
foreign workers. In the internationalisation-performance literature, for example, the ratio of
foreign to total sales and the number of foreign subsidiaries are the most common, but amongst the
more unusual, Kwok and Reeb (2000) defined the MNC as a firm with a foreign assets ratio
greater than one percent, and Lecraw (1983) used the FDI level of the firm’s industry as the
measure of firm-level multinationality.
The absence of an agreed theoretical or operational definition of the MNC is reflected in the lack
of consistency in how IB scholars conduct both high-level and domain-specific theory building
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and testing. This has hindered the ability to compare and contrast alternative theoretical
frameworks, caused confusion in the interpretation of empirical results, and stymied the
emergence of effective replication studies. This in turn has curtailed the process of validating,
refining, and rejecting prevailing theory – which according to positivist scientific methodology is
necessary for advancement of the discipline (Kuhn, 1962; Popper, 1978). As IB research agendas
broaden and intensify, the need for clarity on this issue is becoming critical. The complex and
dynamic IB landscape, characterised by continual change in the structures and strategies of firms
as they evolve, suggests that a definitive theoretical or operational definition is unlikely to emerge.
A better alternative would be to agree on a classification system that encompasses the current
forms of MNC while facilitating the inclusion of new types as they emerge. In this paper, we
propose a simple system for classifying firms by their degree of multinationality, and we use this
to demonstrate the benefits to the discipline of agreeing upon such a system.
In the next section, we ground our perspective by documenting the wide variety of approaches to
defining the MNC in all 393 papers that have used empirical MNC samples in the fourteen most
important international business and management journals between 1987 and 2007: Academy of
Management Journal (AMJ), Academy of Management Perspectives (AMP), International
Business Review (IBR), International Marketing Review (IMR), Journal of International Business
Studies (JIBS), Journal of International Management (JIM), Journal of International Marketing
(JIMR), Journal of Management (JM), Journal of Management Studies (JMS), Journal of
Marketing (JMR), Journal of Marketing Science (JMS), Journal of World Business (JWB),
Management International Review (MIR), and Strategic Management Journal (SMJ). We also
document the many and varied data sources used in these studies, and we show how the
multiplicity of approaches to operationally defining the MNC and to selecting MNC samples has
hindered the ability to draw conclusions that can be robustly replicated and verified or refuted.
In section 3, we construct a simple classification system for the degree of firm-level

multinationality – the matrix of firm multinationality. We are not advancing this scheme as the
optimal system; rather, our purpose is to stimulate debate on the usefulness of an agreed
classification system that facilitates a more coherent and consistent epistemology and
methodology in IB research. We illustrate its use by classifying 1,015 firms from the G7 countries
– Britain, Canada, France, Germany, Italy, Japan and the United States. Using data on the
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international distribution of each firm’s sales and subsidiaries, we show that our sample firms –
which include many of the world’s largest – range from purely domestic (with no international
sales or subsidiaries) to fully global (with sales and subsidiaries in all regions of the world).
In section 4 we demonstrate the usefulness of a classification system for the degree of firm-level
multinationality in advancing IB research. We first show how such a system can provide insights
and perspectives to guide high-level theory building by anchoring important conceptual norms and
traditions, highlighting areas that require theoretical refinement and renewal, and stimulating new
ideas and directions. We then discuss its usefulness for sample selection and hypotheses testing.
In section 5 we point to future research directions. We illustrate how a classification scheme for
firm-level multinationality can be used to improve empirical testing and to help clarify thinking
about several topics in IB, including the relation between firm-level multinationality and
performance, and the regional-global debate. Section 6 contains our concluding comments.
2. Defining MNCs in IB research
The operational definition1 of a word or term provides a clear, concise meaning of a concept to
guide measurement and make it amenable to scientific investigation. Operational definitions
should be easily quantifiable and measurable, and they should point explicitly to what is being
measured and how. In conducting empirical research, operational definitions should be articulated
before compiling samples in order to ensure that researchers collect, use and interpret data
consistently. Borsodi (1967) suggested that operational definitions should be clear, distinct,
standard and reproducible. He listed four canons of definition as adequacy – sufficient to clarify
the meaning; differentiation – eliminate confusion of the referent with other terms by including
any attributes that distinguish it; impartiality – characteristics of similar significance should be
included with equivalent emphasis; and completeness – all important attributes should be included.
Although IB scholars have long been aware of the complexities involved in arriving at an
appropriate definition of the MNC, the discipline has not succeeded in agreeing on an operational
1
Other types of definitions include lexical definitions, which describe a concept in simple terms to a wide audience;
conceptual definitions, which provide the meaning of a concept in a way that is compatible with a measurable
occurrence; and abstract definitions, which are used when the meaning cannot easily be measured.

definition that embodies Borsodi’s (1967) four canons. The earliest attempt to grapple with the
issue of defining the MNC was by Aharoni (1971), who considered three categories of definition:
 Performance definitions, which are based on criteria such as foreign sales and earnings,
foreign assets, and the number of foreign employees.
 Structural definitions, such as the number of countries in which the firm operates, the
nationality of the firm’s top management, and the organisational structure of the firm.
 Behavioural definitions, which focus on the extent to which management personnel think
internationally about strategic opportunities.
Aharoni’s pioneering contribution to defining MNCs has proved to be an insightful and enduring
framework for analysis in research and teaching in IB. Rather than building on or amending
earlier definitions, however, IB scholars have tended to develop an ever-expanding set of
alternative definitions. Panel A of Table 1 lists 19 attributes that have been used as operational
definitions to create empirical samples of MNCs (using Aharoni’s (1971) headings) in the 393
studies published during the period 1987 to 2007 in AMJ (10 studies), AMP (4), IBR (45), IMR (7),
JIBS (133), JIM (25), JIMR (8), JM (6), JMS (8), JMR (3), JWB (13), MIR (89), and SMJ (42)2.
These studies span a wide range of IB sub-disciplines including culture, government relations,
international finance, international human resources, international management, international
marketing, multinationality and performance, and sourcing strategies and structures. Panel B of
Table 1 lists the most popular sources of data used in the studies.
The first column in Panel A of Table 1 lists the number of studies that have used the particular
attribute as the sole criterion for operationally defining the MNC; the second presents the number
of studies that have used the attribute as one in a multi-attribute definition; and the third adds these
together. The overall total of 419 exceeds the number of studies because many have used multi-
attribute definitions. In total, 264 studies used single attribute and 155 used multi-attribute
definitions. Amongst the single-attribute studies, the number of foreign subsidiaries is the most
common (163 studies), followed by foreign sales (62). In the multi-attribute studies, foreign sales
(56) is the most common, with foreign subsidiaries (47) a close runner-up. Other attributes used to
operationally define MNCs include foreign listings, assets, employees, income, and taxation.
2
We also examined the Journal of Marketing Science, but found no studies that had compiled MNC samples. Our
JIBS list includes studies dating back to 1970.

Panel B of Table 1 shows that the most popular data source is the Fortune list which has been used
in 55 studies, followed by the Directory of Japanese Overseas Affiliates (17), and Compustat (13
studies).
Authors of the multi-attribute studies have in some cases developed rather complex approaches to
defining MNCs. Perlmutter (1969) included four attributes: ownership, organisational structure,
the nationality of senior executives, and the percentage of foreign investment. Sullivan (1994)
used Aharoni’s (1971) performance, structural and attitudinal attributes to create an index measure
of firm multinationality. More recent efforts to construct indexes of multinationality include
Gomes and Ramaswamy (1999) and Asmussen (2009). There have been several critiques of the
index approach to defining MNC. Ramaswamy, Kroeck and Renforth (1996), for example, argued
that important information is lost with the aggregation involved in creating an index, and Allen
and Pantzalis (1996) showed that the equal weighting of Sullivan’s (1994) attributes is
questionable.
With the multiplicity of approaches to operationally defining MNCs that we have documented
here, it is not surprising that the outcome has been inconsistent and even contradictory findings
between studies – which could be largely avoided if the IB discipline were to agree on a
classification system for the degree of firm-level multinationality. We illustrate this by briefly
describing the findings of some of the most well-cited empirical papers on two of the most
important topics in IB research: first, the internationalisation-performance relation, and second, the
question of whether investing in home-based MNCs provides the benefits of international portfolio
diversification. For each question, we first show how the issue remains unsettled; and by detailing
the sample selection process in two or three studies, we illustrate how different the samples can be
in the empirical IB literature.
Does firm-level multinationality affect performance?

The question of whether and to what extent the degree of multinationality adds to firm value is
unsettled. Researchers initially sought evidence on a positive linear relation, and mixed results led
to the investigation of various possible nonlinear relations, such as quadratic, U-shaped, and
horizontal S-shaped. Douglas and Craig (1983), Lecraw (1983), Grant (1987) and Brouthers,
Werner and Matulich (2000) found that the degree of multinationality is associated with rising

profitability. In contrast, Mishra and Gobeli (1998) found that greater multinationality per se does
not deliver greater value; Gomes and Ramaswamy (1999) found that greater multinationality
brings performance benefits up to a point beyond which they cease; and Kotabe, Srinivasan and
Aulakh (2002) found that the benefits of multinationality are moderated by R&D and marketing
capabilities. Grant (1987) created a MNC sample of 304 British-owned manufacturing firms from
the Times 500 list of Britain’s largest firms that had at least 10 percent of their production abroad.
Kotabe, Srinivasan and Aulakh’s (2002) sample comprised 49 US-based firms, and the extent of
multinationality was measured by the ratio of foreign to total income.
Do MNCs provide the benefits of international portfolio diversification?

Theory and intuition suggest that investing in locally-listed MNCs should provide international
portfolio diversification benefits. The findings on this question are split down the middle: Hughes,
Logue and Sweeney (1975), Agmon and Lessard (1977), Mikhail and Shawky (1979), Logue
(1982), Errunza, Hogan and Hung (1999), Cai and Warnock (2004) and Berrill and Kearney
(2010) found that investing in domestically-listed MNCs yields international diversification
benefits, but Jacquillat and Solnik (1978), Senchak and Beedles (1980), Brewer (1981), Fatemi
(1984), Michel and Shaked (1986), Mathur, Singh and Gleason (2001) and Rowland and Tesar
(2004) found no evidence of international diversification benefits.
A close examination of a couple of these studies reveals the diversity of their samples. Errunza,
Hogan and Hung (1999) used the 30 largest US companies in the Fortune 100 list, making the
implicit assumption that large firms must be multinational. It is likely, instead, that their sample
includes firms with a broad range of multinationality, from purely domestic to deeply global.
Michel and Shaked (1986) examined Fortune 500 firms in the manufacturing sector, classifying
them as MNCs if at least 20 percent of their sales were foreign and if they had direct investment in
at least 6 countries. Domestic firms were defined as firms with less than 10 percent of sales,
profits and assets abroad.
As this brief overview shows, the diversity in approaches to operationally defining MNCs and to
compiling MNC samples limits comparison across studies, and probably explains a large
proportion of the disparity in their findings. The absence of an agreed approach to operationally
defining or measuring the degree of firm-level multinationality has led to highly dissimilar firms

being included in samples labelled ‘MNC’. This has resulted in disparate findings across similar
studies, and by making it hard for researchers to confirm or contradict previous findings, has
stymied the development of the discipline. The difficulties associated with MNC definition were
recognised more than 40 years ago by Perlmutter (1969, p. 11) who observed that: ‘Part of the
difficulty in defining the degree of multinationality comes from the variety of parameters along
which a firm doing business overseas can be described …’ Another early articulation of the
problem was by Sanden and Vahlne (1974, p. 92), who argued that ‘There is, of course, no sharp
demarcation line between multinational and national firms’. The essence of our argument is that
given the complexity of the MNC, rather than searching for a single acceptable definition, a better
approach would be to develop a classification system for the degree of firm-level multinationality
that is sufficiently flexible to encompass the known forms of international enterprise while
allowing for new forms that may emerge in the future.
3. Classifying firms by multinationality
Classification systems are widely used in theoretical and empirical analysis in many disciplines in
the arts, humanities, physical sciences and social sciences. By focusing on agreed sets of
characteristic dimensions, classification systems condense and organise information to facilitate
comparison and contrast between object types within and across populations. Many are well
known, such as the Linnaeus hierarchical classification of plants and animals, the periodic table of
chemical elements and the Dewey library classification system. In business and management,
readers will be familiar with the various industry classification systems (such as the Industry
Classification Benchmark (ICB), the North American Industry Classification System (NAICS),
and the Standard International Trade Classification (SITC)), and the Journal of Economic
Literature (JEL) system that organises the business disciplines into 20 main categories. Other
well-known business-related classification schemes are Hambrick’s (1984) classification of
strategy, Pavitt’s (1984) technical change, McGee and Thomas’ (1986) strategic groups,
Greenberg’s (1987) organisational structure, Weatherford and Bodily’s (1992) asset yield
management, Miller and Roth’s (1994) manufacturing strategies, Archibugi and Michie’s (1995)

technology globalisation, Law, Wong and Mobeley’s (1998) multidimensional constructs, Earl’s
(2001) knowledge management, and Marks, Mathieu and Zaccaro’s (2001) team processes.3
Although there is no generally agreed classification system for the degree of firm-level
multinationality, a number of authors have developed high-level typologies of MNCs. Among the
best-known and most highly cited of these are Perlmutter’s (1969) threefold typology of
managerial mindsets as home country-oriented (ethnocentric), host country-oriented (polycentric),
and world-oriented (geocentric); Caves’s (1982) threefold typology of multiplant MNCs as
horizontal, vertical and diversified; Bartlett and Ghoshal’s (1989) fourfold typology of MNC
organisational structure as multinational, international, transnational and global; Dunning’s (1993)
fourfold typology of the rationale for FDI as market-seeking, efficiency-seeking, resource-seeking,
and strategic asset-seeking; and Rugman’s (2003) fourfold typology of MNC strategic orientation
as home-regional, bi-regional, host-regional and global. Others include Hill, Hwang, and Kim’s
(1990) foreign market entry modes, Hennart’s (1991) control modes, and Morrison and Roth’s
(1992) industry strategies. Harzing (2000) reviewed firm-level typologies in IB and found that
they relate to variables such as control, human resource practices, organisation design, and strategy
and subsidiary behaviour.
The difference between typologies and classification schemes has received considerable attention
in the business and management literature. Doti and Glick (1994) argued that the terms are often
confused, and in the process they provided a good definition of typology:
…..a researcher might reasonably conclude that organizational typologies are atheoretical
devices that are mainly useful for categorization ... such a conclusion would be incorrect …
typologies are complex theoretical statements that should be subjected to quantitative
modeling and rigorous empirical testing …. typologies identify multiple ideal types, each of
which represents a unique combination of the organizational attributes that are believed to
determine the relevant outcome(s). (pp. 231-232).
A classification scheme is defined by Chrisman, Hofer and Boulton (1988) as:
….. a system or scheme in order for researchers to arrange entities into taxa [groups or
categories] based on their similarities, differences, and relationships to one another as
determined by or inferred from their most fundamental characteristics. (p. 415).
3
The influence and usefulness of these contributions is amply demonstrated by their exceptionally high citation rates.
At the time of writing, these papers have more than 250 citations each and together have been cited more than 4,800
times on Google’s Advanced Scholar search engine.

Classification schemes categorise phenomena into mutually exclusive and exhaustive groups using
discrete decision rules (Doti and Glick, 1994), and their purpose is to guide theoretical and
empirical research. In contrast, typologies are complex theories that can and should be tested
empirically. Classification schemes can in fact be used as a framework for the empirical testing of
typologies. We discuss how our classification scheme could be used to test some of the best-
known IB typologies in section 4.
3.1 A classification system for firm-level multinationality
Our objective in developing a classification system for the degree of firm-level multinationality is
to create a scheme that can encompass the important dimensions of multinationality while at the
same time being intuitive and easy to use. This involves a tradeoff between accuracy and
simplicity. A reasonably simple design is critical because multidimensional classification schemes
‘blow up’ when dimensions are added.4
Although classifications schemes are not theoretical devices, theory is an important element in
guiding the development of such systems. Indeed, the literature on organisational classification
systems (McKelvey, 1975, 1978; Carper and Snizek, 1980; Chrisman, Hofer and Boulton, 1988;
Rich, 1992) has long recognised that successful systems should capture key characteristics by
drawing on theory while taking into account empirical and practical evidence. In designing a
classification system, therefore, the first decision is to choose the key defining characteristics of
the entities to be classified. The second is to determine the classification system’s categories.
Chrisman, Hofer and Boulton (1988, p. 416) describe five necessary attributes of the categories:
they should be mutually exclusive; internally homogeneous; collectively exhaustive (every
organisation must belong to an existing group); stable (in the sense that the groupings should be
fixed over time, and not subject to change with new or different empirical tests or data sets); and
relevantly named (consistent with common usage to ensure effective communication between and
within the academic and business communities). Keeping in mind the importance of simplicity,
and informed by Chrisman, Hofer and Boulton’s (1988) necessary attributes, our classification
scheme for firm-level multinationality captures two defining characteristics: breadth – the extent
4
Dess, Newport and Rasheed (1993) point out that as the number of dimensions of a construct increases
arithmetically, the number of combinations increases geometrically. As we see in the next section, a 2 x 4
classification matrix of multinationality yields 16 combinations.

of geographical spread of operations, and depth – the degree of engagement with and exposure to
each geographical unit.
Breadth
We measure breadth as the extent of geographic spread using four broad categories: domestic,
regional, trans-regional and global. To calibrate this, we divide the world into six regions based
on the inhabited continents: Africa, Asia, Europe, North and Central America, Oceania, and South
America. Asia includes the Middle East and Turkey, and Europe includes countries as far east as
Armenia, Azerbaijan, Belarus, Ukraine and the Russian Federation. North and Central America
includes Mexico and the other countries of Central America and the Caribbean as well as the
Canada and the United States. Oceania comprises Australia, New Zealand and the Pacific islands.
Table 2 provides a list of the countries in each region.
We use continent-based regions for two important reasons. First, by encompassing all countries of
the world, it satisfies Chrisman, Hofer and Boulton’s (1988) third necessary attribute – that the
groupings should be collectively exhaustive. Our delineation is more inclusive than many of the
regional groupings that have been seen in the IB literature. For example, the ‘triad’ of Ohmae
(1985) – the EU, Japan and the United States – was advocated on the basis that these regions
constituted the world’s three largest markets and that most large firms were headquartered there.
This was extended by Rugman (2003) and Rugman and Verbeke (2004) to include the expanded
EU, Asia and NAFTA, but it still excludes many countries and whole continents – Africa, South
America, and Australasia.5 Our continent-based regions provide a framework for examining the
activities of triad-headquartered firms beyond the ‘triad’ (Flores and Aguilera, 2007), and of firms
headquartered in non-triad emerging economies that internationalise into triad regions and
elsewhere (Aggarwal and Agmon, 1990; Aulakh, 2007). Second, our regions are defined along
geographic rather than political lines, because the political map can change over time – as
exemplified by the obsolete regions EFTA and COMECON, used by Hirsch and Lev (1971) and
5
The ‘triad’ excludes 155 countries, and these are mainly emerging economies in Asia, Eastern Europe, the Middle
East, South America and Africa. The IMF’s and the World Bank’s list of the largest 20 economies measured by GDP
in 2008 includes Brazil, China, India and Russia (the so-called BRICs) along with Indonesia and Mexico. These are
all outside the triad, as are many of the world’s largest 50 economies – including such countries as Argentina, Nigeria,
Poland, Saudi Arabia and Turkey.
10

Miller and Pras (1979) respectively. Our classification scheme therefore satisfies Chrisman, Hofer
and Boulton’s (1988) fourth necessary attribute – that the groupings are stable and not subject to
alteration when empirical or other circumstances change. It therefore facilitates the analysis of
changing patterns in international business over time. This is increasingly important because the
geographical distribution of production, investment and consumption are becoming more diverse
and dynamic (Dunning, 2009). The emergence of Eastern Europe from communism in the early
1990s, the development and growth of China and India during the last two decades, and more
recent trends such as the rise of the South American economies and increasing flows of FDI into
Africa and from the Middle East are now on the research agendas of IB scholars.
Depth
We measure the depth of market engagement on the basis of the commitments and contractual
arrangements that firms engage in, and the resulting levels of control they obtain together with the
risks they face. Depth ranges from the ‘shallow’ engagement with international markets
associated with exports and imports, to licensing and franchising, operating foreign offices,
forming alliances and joint ventures, through to the commitment of FDI – which generally
involves a deeper engagement with foreign markets and higher exposures to foreign business,
economic and political risks than say exporting or licensing.
In defining depth in this way, we are following several theoretical studies from the entry mode
literature,6 which place the various entry modes on a scale from ‘low engagement’ to ‘high
engagement’. Anderson and Gatignon (1986), for example, defined 17 entry modes from ‘small
shareholder’ to wholly-owned subsidiary (WOS) based on the tradeoff between resource
commitment and control. Erramilli and Rao (1990) developed a 9-point ‘level of involvement’
scale with licensing and franchising at the lowest end of the scale and WOS at the other. Hill,
Hwang and Kim’s (1990) typology places entry modes on a scale based on the extent of resource
commitment, control and dissemination risk. As we will shortly illustrate, researchers can use one
or more of the depth dimensions, depending on the issue being studied and the availability of data.
6
Brouthers and Hennart (2007) and Canabal and White (2008) provide reviews of research on foreign entry mode.
11

The matrix of firm multinationality
Combining the breadth and depth dimensions, we create our simple matrix of firm
multinationality. A firm whose business activities take place entirely within its home country is
defined as domestic (D), and a firm with business activities in the region in which it is
headquartered is referred to as regional (R). R can be further delineated into three categories: R1
(less than one-third of the countries in the region), R2 (between one-third and two-thirds) and R3
(more than two-thirds). For example, a British firm that is headquartered in London and operates
in one or two countries in the rest of Europe would be classified as R1. If, however, it has
operations throughout Europe (and not elsewhere), it would be classified as R3. If a firm conducts
business in more than one region (but not fully globally) it is defined as trans-regional (T), and this
category is further subdivided into T2 (two regions), T3 (three regions), T4 (four regions) and T5
(five regions). We classify firms as ‘global’ (G) if they conduct business in all six regions.
Because our classification scheme includes the full range of geographic spread, it satisfies
Chrisman, Hofer and Boulton’s (1988) third necessary attribute: that the categories should be
collectively exhaustive. Our scheme is inclusive of all firms – including purely domestic firms.
For ease of exposition, we initially work with a basic version of our classification scheme
containing the four broad breadth dimensions: domestic (D), regional (R), trans-regional (T) and
global (G). We demonstrate and illustrate the system using two depth dimensions – trading (sales)
(S) and investment in subsidiaries (I). Putting these together, we derive our 2 x 4 matrix of firm
multinationality shown below, in which the first letter refers to the depth, and the second to the
breadth of multinationality. This allows us to classify firms into categories ranging from purely
domestic (SD-ID) that do not export and have no subsidiaries abroad, to deeply global firms (SG-
IG) that have sales and subsidiaries in all regions of the world. In between these extremes, firms
can be classified into groups depending on the combination of their depth and breadth. Table 3
describes three types of regional firm (numbered 2 to 4), five types of trans-regional firm (5 to 9)
and seven types of global corporation (10 to 16).
12

Breadth of geographical spread
Trans-
Depth of engagement Domestic Regional Global
regional
Sales SD SR ST SG
Investments (subsidiaries) ID IR IT IG
A simple example illustrates the intuition behind our classification scheme. Two hypothetical
Canadian firms, Maple Inc and Rocky Inc, export their products to the United States and Europe.
Maple’s goods are manufactured by a number of subsidiaries in Canada so it is a ST-ID firm with
trans-regional sales and domestic subsidiaries. Rocky is a ST-IT firm with trans-regional sales and
subsidiaries because its products are manufactured by subsidiaries in Brazil and Thailand. If these
two firms were classified by sales – the most common approach to operationally defining MNCs
in the IB literature – they would be deemed the same. Clearly, however, these firms face
dissimilar challenges, costs and risks.
Our matrix of firm multinationality acknowledges location as a pivotal dimension of

multinationality. Location has long played a key part in IB theory and strategy (Weber, 1929;
Lösch, 1954; Dunning, 1977; Martin, 1999; Ronen and Shenkar, 1985; Ghemawat 2003, 2005;
Ricart et al. 2004). The ‘sticky places within slippery space’ described by Markusen (1996) and
Florida’s (2005) ‘spiky’ world provide the basis for international strategy that is lacking in the
‘flat’ world of Friedman (2006). More recently, Dunning (2009) notes that although lower trade
costs and barriers have seen greater geographical dispersion between the location (L) and
ownership (O) of production, more reliance on knowledge and other intangible assets has led to
greater concentration in specific clusters, countries and regions. Governments now compete
vigorously for FDI (Wheeler and Mody, 1992; Gertler, 2001; Barry and Kearney, 2006), and the
more successful of these have created innovative regions and clusters like the London square mile,
Hydrabad, and Silicon Valley (Teece, 2000; Kenny, 2000; Casper, 2007; Whitley, 2009) – that are
prime examples of ‘sticky places’ between ‘wide-open spaces’ that attract MNCs at different
depths of market engagement.
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In addition to location, our classification scheme acknowledges distance as an important
dimension of firm-level multinationality (Nachum and Zaheer, 2005). The gravity model has been
applied to study patterns of firm-level internationalisation, modes of foreign market entry,
international strategy, and the effects of culture on human resources, management and marketing
(Ghemawat 2001; Leamer and Storper, 2001; Tihanyi, Griffith and Russell 2005; and Slangen,
2006). While the locational choice and multinationality-performance literatures often allude to
many factors other than purely geographical distance – cultural, economic and psychic, for
example – geographical distance can be seen as a reasonable approximation of these. In their
review of country groupings, Aguilera, Flores and Vaaler (2007) argued that physical contiguity –
the most straightforward approach to defining regions – is also the most appropriate because
geographical proximity correlates closely with other properties such as culture. Consistent with
this, Goerzen and Beamish (2003) found that MNCs’ international asset dispersion (their purely
geographical measure of international scope) dominates the political and cultural diversity of
MNCs’ foreign operations. Although our system does not explicitly include any metric for
distance, it implicitly acknowledges that activities that are trans-regional or global will generally
be more distant from the internationalising firm’s home base than domestic or home regional
activities.
3.2 Illustration of the classification scheme
To illustrate how the matrix of firm multinationality can work in practice, and to clarify how it
differs from a typology, we construct a sample of firms from Canada, France, Germany, Italy,
Japan, the United Kingdom and the United States that are the constituent firms of these countries’
main stock market indexes: the TSX 60, the SBF 120, the HDAX 110, the MIB-SGI 174, the Nikkei
225, the FTSE 100 and the S&P 500. We have compiled this list from the websites of each
country’s stock exchange in 2006. The geographical spread of subsidiaries was obtained from
Dun and Bradstreet’s Who Owns Whom 2005/06, which specifies the location by country of each
subsidiary. We obtained data on the geographic spread of each firm’s sales from Worldscope,
which is drawn from company accounts for the year ending 31 December 2005. Of our initial data
set of 1,289 firms, data on sales and subsidiaries were available for 1,143 and 1,155 companies
respectively.
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As well as being much larger than the Fortune 500 (which is the most commonly-used data source
in research on MNCs, as detailed in Panel B of Table 1), our data set has more non-US firms and it
includes smaller firms from a more eclectic range of industries. Our sample comprises firms in 10
broad ICB industry categories: industrials (237 firms), financials (231), consumer services (195),
consumer goods (174), technology (109), basic materials (106), health care (88), oil and gas (65),
utilities (62) and telecommunications (22). The mean incorporation date is 1922, with firm age
ranging from more than 5 centuries (Banca Monte dei Paschi dates from 1472) to less than 5 years.
The largest firm is Exxon Mobil, and average size by sales is US$14 billion.
The two right-hand columns in Table 3 show the number and percentage of our sample firms in
each multinationality category for the 1,015 firms for which both sales and subsidiary data are
available. Our classification scheme does not impose thresholds; if a firm has any sales or a
minimum of one subsidiary in a particular country or region, it is considered to have a presence
there. It is important not to use thresholds for two main reasons. First, the average firm in a large
and relatively closed country will usually have a smaller proportion of sales and assets abroad than
a similar firm in a more open country (Glaum and Oesterle, 2007; Eden, 2008). Using thresholds
will therefore result in a large number of firms from closed economy countries being excluded
from the sample, resulting in selection bias. Second, countries vary greatly in their market size,
wealth and price levels, rendering sales thresholds inappropriate. For example, if a firm from a
developed country sells its products in Africa, that market will most likely constitute a small
fraction of its overall sales. This does not mean, however, that the firm considers its presence in
Africa irrelevant to its operations and strategies.
There are 107 (11 percent of the sample) domestic SD-ID firms with no foreign sales or
subsidiaries, and 56 (5 percent) regional firms. Trans-regional firms are the most numerous; 686
or 68 percent fall into this category. Most of these (53 percent) are ST-IT firms that are trans-
regional in both sales and subsidiaries. Lastly, 16 percent of the sample firms have a global reach
in either their sales or investments. The fact that some of our categories are rather underpopulated
– there are few regional firms, for example, and few firms are categorised as types 10, 11, 13 and
14 – does not imply that they are redundant. Classifying a different set of firms would
undoubtedly result in a different distribution of firm types. The key point is that our matrix of firm
multinationality is easy to implement and can be applied to different samples of firms.
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Table 4 provides comprehensive details on the largest 100 firms7 in our G7 sample. We rank the
firms by size (column 1), and provide the company name and industry sector (2 and 3), the date of
formation (4), the size measured by sales in US$ billions (5), and the country in which the firm is
headquartered (column 6). In columns (7) and (8) we categorise the firms using our 10-point
breadth dimension (D, R1, R2, R3, T1, T2, T3, T4, T5 or G) for the sales and subsidiaries depth
dimensions respectively; and in column 9 we categorise each firm as one of the 16 firm types as
described in Table 3. For the 100 largest listed firms in the G7 countries, there are relatively few
at either end of the multinationality spectrum: 7 category 1 (SD-ID) purely domestic firms, and 4
category 16 (SG-IG) fully global MNCs. The most common firm type is category 9 (ST-IT) (trans-
regional sales and trans-regional investments) with 40 constituent firms, and there are 38 category
15 (ST-IG) firms with trans-regional sales and global investments.
4. Implications for theory and testing
The literature on organisational classification (McKelvey 1975, 1978; Carper and Snizek 1980;
Rich, 1992) has long recognised that a successful classification scheme should be consistent with
prevailing theory while also reflecting the world as it is perceived. This generates confidence in
its applicability which in turn promotes widespread acceptance and use by researchers, teachers
and practitioners. Taking the lead from the designers of the influential business and management
classifications mentioned in the previous section, classification schemes inform theory building in
five main ways. First, they provide a framework within which researchers can think about ideas
and form opinions; stimulating reflection on related topics that might previously have seemed
unconnected, and they provide direction in refining existing theories and developing new theory.
Second, classification schemes emphasise the conceptual traditions from which theory develops.
This helps to ensure that concepts are applied consistently with the existing body of theory; and by
identifying trends in the development of the literature, classification schemes help to shed light on
areas that need new theory building, replication or validation studies, or new empirical approaches.
Third, classification schemes assist in identifying the common and disparate elements of
alternative theories and in clarifying the value of specific contributions. By enhancing clarity and
reducing confusion, they help researchers to focus on promising directions while avoiding sterile
7
The classifications for all of the sample G7 firms are available on request from the authors.
16

debates. Fourth, classification schemes support the compilation of complete and systematic data
sets to test the various theories, and this spurs the development of the discipline. Finally,
classification schemes caution scholars that because of the richness and variety of business forms,
no single high-level theory is likely to capture all their complexity, no matter how elegant the
theoretical framework.
These insights apply to our classification system of firm-level multinationality. The rich ecology
of international business, inhabited by firms of different age, size, industry, country of origin and
degree of multinationality, means that each firm will have a unique combination of objectives,
strategies, opportunities and constraints. Given their financial, management and
knowledge resources, internationalising firms choose a level of engagement with foreign markets
that maximises their risk-adjusted expected returns net of expected costs. We should therefore
expect to observe many alternative patterns of internationalisation, and the agenda of IB research
is rightly focussed on assessing whether a small, manageable set of high-level theories can explain
a wide range of patterns in a meaningful and insightful way. The main theories of
internationalisation have been discussed and evaluated by many scholars (for example, Andersen,
1997; Oviatt and McDougall, 1994; and Hutzschenreuter, Pederson and Volberda, 2007), and it is
not our intention to repeat this exercise here. To illustrate the usefulness of our proposal for an
agreed classification of firm multinationality to high-level theory building in IB, we show how it
casts light on the three best-known theories of the internationalisation process: the OLI paradigm
(Dunning, 1993, 2000), the PTI or Uppsala model (Johanson and Wiedersheim-Paul, 1975;
Johanson and Vahlne, 1977) and the NVIT (Oviatt and McDougall, 1994, 2005; Knight and
Cavusgil, 1996).
While the OLI paradigm focuses on discrete rational decision-making and the PTI emphasises
organisational learning, both theories imply that the internationalisation process will be a
sequential one – in which firms initially internationalise into geographically, culturally and
psychically close markets at shallow levels of entry mode. As their OLI advantages increase over
time, or as they learn and gain experience and confidence according to the PTI, firms will reach
further afield at deeper levels of engagement. This process has been described in life-cycle terms
by Aharoni (1966), and Dunning (1993) outlines five stages of a firm’s internationalisation: from
17

exporting to direct sales, to part foreign production that leads over time to new foreign production
that deepens and widens the value-added network, and finally to regional and global integration.
More recent work by Barkema and Drogendijk (2007) and others, however, suggests that the time
dimension of alternative internationalisation patterns can be very different across firms. This
notion is embedded in the NVIT of Oviatt and McDougall (1994, 2005). Oviatt and McDougall
(2005) define an INV as a firm that seeks competitive advantage from its resources and outputs in
many countries from inception, and several studies since Knight and Cavusgil (1996) confirm their
pattern of rapid globalisation. INVs clearly do not fit the traditional profile of MNCs (Hashai and
Almor, 2004), and their increasing pervasiveness poses challenges to the ‘stages’ theories of
internationalisation.
Jones and Coviello (2005) observe that combining the insights of the OLI paradigm, PTI theory,
and NVIT suggests that integrating multiple theoretical perspectives on firm-level characteristics
and behaviour in a holistic and pluralistic manner will yield a more complete understanding of the
internationalisation process. Hutzschenreuter, Pederson and Volberda (2007) further observe that
the key determinants of internationalisation in the OLI eclectic paradigm (assessing revenues,
costs and risks) and PTI theory (accumulating experience), along with the knowledge-based view
of Kogut and Zander (1993), yield incremental, path-dependent patterns that are largely external to
managerial initiatives, positions and strategies. Given that a holistic approach to understanding
internationalisation necessitates joint consideration of ‘paths, process and positions’,
Hutzschenreuter, Pederson and Volberda (2007) ask whether each firm’s journey is different or
whether generic patterns exist. In so doing, they propose a classification of managerial intentions
to highlight the role of ‘positions’. Our classification scheme for firm-level multinationality
encompasses each of the high-level theories of internationalisation and is consistent with the
conceptual traditions from which they emerge – that is, it embraces the ‘paths’, ‘processes’ and
‘positions’ that underlie the main theories of internationalisation.
To see this, consider five alternative patterns of internationalisation within our scheme, which are
depicted in Figure 1:
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Example 1: Shallow internationalisation in stages: SD-ID → SR-ID → ST-ID → SG-ID. A
purely domestic firm (SD-ID) internationalises across the ‘sales’ row of the matrix of firm
multinationality as it expands exports in its home region to become an SR-ID regional firm,
then across regions to become an ST-ID trans-regional firm, and eventually across all regions
to become an SG-ID global firm, with global sales but with no foreign subsidiaries.
Example 2: Balanced internationalisation in stages: SD-ID → SR-IR → ST-IT → SG-IG.

This firm expands the geographical spread of its trading operations along with its foreign
subsidiaries into its home region to become an SR-IR regional firm, then expands its sales
while extending its network of subsidiaries across regions to become an ST-IT trans-regional
firm, and eventually across all regions to become a deeply global SG-IG firm.
Example 3: Deep internationalisation in stages: SD-ID → SD-IR → SD-IT → SD-IG. A

purely domestic firm internationalises by expanding its subsidiary operations to other countries
in its region (becoming an SD-IR firm), then across regions to become an SD-IT trans-regional
firm, and eventually establishing a fully global network of subsidiaries to become an SD-IG
firm – with global subsidiaries and purely domestic sales.
Example 4: Rapid shallow internationalisation: SR-ID → SG-ID. This describes the

internationalisation of an INV firm that begins by trading outside its home base but within its
region as an SR-ID regional firm, and quickly expands its sales to all regions of the world to
become an SG-ID global firm with no foreign subsidiaries.
Example 5: Born trans-regional: ST-IR → SG-IR → SG-IT. This describes the

internationalisation of an INV firm that begins by trading across regions while establishing
subsidiaries in its home region, and then expands the breadth of its sales to become an SG-IR
global firm. This is followed by further expansion of its subsidiaries across regions to become
an SG-IT global firm with trans-regional subsidiaries.
Examples 1, 2 and 3 are consistent with OLI and PTI, and examples 4 and 5 are consistent with the
INVT that ‘skips’ the traditional stages of internationalisation. Many other patterns of
internationalisation can be described using our classification system. Some will be consistent with
either or both OLI and PTI, some will be consistent with INVT, and others will be incompatible
with all three – our classification system accommodates yet unobserved patterns of
internationalisation. In this vein, Matthews and Zander’s (2007) suggestion of ‘international
entrepreneurial dynamics’ to capture pre-internationalisation entrepreneurial experiences of INV
firms is also encompassed within our system as it includes domestic firms at one end of the
spectrum of multinationality. Our main point here is that categorising firms by their degree of
multinationality yields insights into prevailing theories of firm-level internationalisation patterns,
while also providing the framework for conceptualising new combinations and patterns.
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Hull (1965) describes how biological classifications prior to Darwin were static insofar as species
were classified into fixed groups on a permanent basis. Darwin’s evolutionary theory showed how
species can evolve within and across groups, and this stimulated the emergence of phylogenic (or
evolutionary) classification systems. McKelvey (1982) and others have reinterpreted Darwinian
evolutionary theory to describe how organisations can evolve across groups within phylogenic
classes, and Rich (1992) illustrates how theory-builders can use phylogenics as a lens to look into
the past in order to explain the present. Although the traditional Darwinian model sees evolution
occurring slowly over long periods, ‘revolution’ can sometimes occur when external shocks create
‘jumps’ in evolutionary adaptation. Similarly, in IB we have seen the revolution that is the INV;
the ‘shock’ being fast-developing innovations in communication and transportation technology.
Our matrix of firm multinationality facilitates longitudinal examination of the broad range of
internationalisation patterns that we now observe, from the slowly evolving large firm to the
dynamic and ambitious INV.
Our classification scheme is neutral with respect to the typologies of MNCs’ managerial
intentions, marketing strategies and entry modes. It can facilitate analysis of Dunning’s (1993)
‘why’ firms engage in FDI, Hill, Hwang, and Kim’s (1990) ‘how’ firms enter new markets,
Perlmutter’s (1969) managerial orientations, and Bartlett and Ghoshal’s (1989) organisational
forms. It can be used to describe and analyse, for example, how and why a Chinese mining firm
engages in resource-seeking FDI in Africa (a lá Hill, Hwang and Kim, 1990 and Dunning, 1993),
and how it manages the operation either by retaining full control in China (a lá Perlmutter’s home-
country ethnocentric orientation), or by decentralising and delegating responsibilities to its African
subsidiary (a lá Bartlett and Ghoshal’s ‘multinational’ firm). Our classification scheme can also
be used to study a ‘born trans-regional’ Norwegian software firm that operates in four regions,
selling its products via the internet, and establishing a ‘transnational’ organisational structure with
dispersed and interdependent teams of software developers (a lá Bartlett and Ghoshal).
Our classification scheme can also be used as a framework for consistent empirical testing of
MNC typologies. In his critique of typologies of strategy, Miller (1996) argues that they are rarely
tested empirically, and when they are, they are usually found to fall short. This is in part
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“….because approaches vary greatly among studies: different variables, operationalizations
and samples are used to test the same typologies. Moreover, conflicting findings are rarely
resolved as researchers build too little on each other’s work. Many scholars, for example,
have tested [various typologies of strategy] using ambiguous and divergent operationalizations
and sample definitions. So results remain inconclusive after many years of work.”
[Miller, 1996, p. 506]
In short, Miller (1996) points out problems with empirical tests of typologies that are similar to our
critique of the body of empirical work on MNCs – inconsistent operational definitions and sample
selection across studies.
4.1 Implications for sample selection
We have seen how the MNC has been operationally defined using a diverse and sometimes
eccentric collection of characteristics, which contributes to inconsistent and often contradictory
findings. This problem is exacerbated by the use of samples that are too general and broadly
specified to yield meaningful results that can reliably support or reject prevailing theory.
McKelvey (1978) highlighted this problem more than 30 years ago with an insightful analogy:
Consider a typical study on four organizations: a gear manufacturer, a large engineering firm,
a small retail store, and a social welfare agency. The investigator would typically claim that
findings from such a sample (and population) would be more broadly applicable than if the
study were limited to, say, small stores. This sample is akin to a biologist’s wanting to make
broad statements about heartbeat rates based on a sample of one elephant, one tiger, one
rabbit, and an alligator. Obviously, no meaningful biological population is defined by such a
sample, and surely no one would believe the researcher’s statements about heartbeats. They
would probably wonder if the researcher’s elephant was at all representative of other elephants
– perhaps it was older, more vigorous, or bigger than the average elephant, and so on.”
[McKelvey, 1978; pp 1437-1438].
McKelvey advocates narrowing the selection process to create samples of firms with similar
characteristics. The resulting loss of generalisability would be ‘….offset by gains in the
definitiveness of the findings, the levels of variance explained, and the applicability of the results
to the population. In short, solid findings about a narrower population are better than marginal
findings of questionable generalizability to a broadly defined population.’ (McKelvey, 1978:
1438). A valid alternative to this approach is to gather a large, diverse sample and to control for
different characteristics. Our classification system facilitates the selection and compilation of both
of these types of samples. In the next section, we provide examples of how this can be done.
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5. Future research directions
In addition to providing a framework for empirical testing of high-level internationalisation

theories and typologies, our classification system provides fresh perspectives on current debates
and opens up the possibility of new research directions. Some examples are provided here.
5.1 Standardised marketing strategies and MNC performance
The question of whether MNCs use standardised or localised approaches in foreign markets to
branding, pricing, product mix, promotion, and distribution channels, and which of these delivers
superior performance, yields mixed results that are difficult to generalise and reconcile (Krum and
Rau, 1993; Liu and Pak, 1999; Theodosiou and Katsikeas, 2001; Griffith, Chandra and Ryans,
2003; Han and Kim, 2003; Cui and Lui, 2005; Xu, Cavusgil and White, 2006). This arises largely
because of inconsistent approaches to the operational definition of MNC. Liu and Pak (1999), for
example, studied 35 firms with venture locations in Beijing and Shanghai on the basis of personal
knowledge of the management team, whereas Griffith, Chandra and Ryans (2003) used a random
sample of US Fortune 750 firms with Indian operations, and Han and Kim’s (2003) sample
comprised the 200 largest Korean exporters to China with head offices in Seoul. Because of the
widely disparate approaches to sample selection, the findings from these studies cannot easily be
compared to related studies, and this makes it difficult for researchers to build on prior work.
International marketing researchers could use our classification scheme as a framework for
constructing samples that are more consistent across studies, facilitating more effective
comparison. By thinking carefully about the type of firm that is to be included in a sample –
defined by such features as the country of its headquarters, the range of its international
experience, and the markets in which it operates – our classification scheme also assists
researchers to balance the tradeoffs between narrowing the sample in order to address very specific
research questions, and obtaining generalisable conclusions.
5.2 Firm-level multinationality and foreign exchange exposure
Firms become more directly exposed to exchange rate movements as they internationalise, but
highly internationalised firms with assets and earnings denominated in many currencies are
‘naturally hedged’ insofar as exchange rates are imperfectly correlated. Using a data set of 220
22

US firms from the Fortune 500 list, Pantzalis, Simkins and Laux (2001) defined MNCs as firms
with at least one foreign subsidiary, and they used two measures of firm-level multinationality: the
number of foreign countries in which the firm had subsidiaries, and the number of foreign
subsidiaries in its ‘top two’ foreign countries (as a measure of concentration). Consistent with
theory, and confirming the importance of the extent of the firm’s international operations on its
exchange rate risk, they found that the greater the number of foreign subsidiaries the lower the
foreign exchange exposure, and that greater concentration is associated with higher foreign
exchange exposure. Using a sample of over 3,000 firms from 23 OECD countries, Hutson and
Stevenson (2010) found that the more open the economy, the greater the degree of firm-level
exposure. This, they argue, is due to firms in open economies being more exposed to indirect
foreign exchange exposure – that is, the exposure arising from the competitive environment in
which the firm operates (Bodnar, Dumas and Marston, 1992).
Future research could usefully use our classification scheme to provide a more consistent approach
to sample selection together with a superior measure of the degree of firm-level multinationality.
For example, researchers could examine whether purely domestic firms – those that are
internationally undiversified – experience greater foreign exchange exposure than highly
internationalised firms. Researchers could also compare the exposure experience of firms with
varying degrees of breadth and depth of multinationality – such as type 10 SG-ID firms with
global sales and no foreign subsidiaries versus type 13 SD-IG firms with no foreign sales but with
global subsidiaries.
5.3 Firm-level multinationality and performance
We saw in section 2 how divergent approaches to operationally defining the MNC has contributed
to disparate findings and ongoing debate on whether firm-level multinationality delivers enhanced
performance. Having analysed more than 100 empirical studies spanning 3 decades, Contractor
(2007) concluded that the multinationality-performance literature is mixed, confusing and
contradictory, and asked ‘What exactly do we mean by ‘internationalisation’ or ‘degree of
internationalisation? At the very least it is incumbent on authors to state the exact construction of
their DOI [degree of internationalisation] variable in their papers.’ (p. 469). Bausch and Krist
(2007) argued that since there is no universal internationalisation-performance relation, rather than
23

looking for generalisations, future research should develop more finely-grained models –
differentiating between firms of different age, size, country of origin, industrial sector, product
diversification, and R&D intensity. Hennart (2007) concurred, suggesting that empirical studies
have been undertaken at too high a level of aggregation, and that rather than building ever-more
sophisticated measures of multinationality, researchers should focus on the key dimensions of
multinationality such as the size of foreign sales versus their dispersion.
Our classification scheme addresses these concerns and provides an appropriate framework for
analysing the multinationality-performance issue. Using the scheme, Berrill and Kearney (2010)
showed that more internationalised MNCs deliver superior risk-adjusted equity returns after
controlling for size, industry and country effects. Subsequent research could usefully generalise
this approach. For example, researchers could build large cross-country databases to examine
whether firms that expand domestically exhibit different performance trajectories to firms that
expand internationally, controlling for country, regional and other effects. A related research
question is, is expansion within the home region associated with different performance vis-à-vis
expansion across regions? Further, does this pattern depend on the depth dimension of
internationalisation? For example, are there differences in performance between type 5 ST-ID
firms with trans-regional sales but no foreign investments and type 9 ST-IT firms with trans-
regional sales and investments?
5.4 The regional/global debate
The extent to which the world’s largest MNCs have a truly global outlook remains a hotly debated
topic. Some scholars (Yip, 2002; Govindarajan and Gupta, 2008) argue that global strategy is
paramount, while others such as Doremus et al (1998) and Ghemawat (2001, 2003, 2005) argue
the case for semiglobal strategy. Rugman (2000, 2003, 2005), Rugman and Hodgetts (2001),
Rugman and Verbeke (2003, 2004) and Collinson and Rugman (2008) go further in arguing that
the world’s largest MNEs operate mostly within their home regions, that very few are global, and
that global strategy is a myth. Rugman and Hodgetts (2001, p. 341), for example, conclude that
the CEOs of MNCs should ‘...encourage all [their] managers to think regional, act local – and
forget global.’ Understandably, this has not gone unchallenged. Aharoni (2006), Asmussen
(2009), Westney (2006), Dunning, Fujita and Yakova (2007), Flores and Aguilera (2007),
24

Osegowitsch and Sammartino (2008), Tallman (2007), Vives and Svejenova (2007) and Eden
(2008) have introduced refinements to Rugman’s approach to categorising firms and demonstrated
that the evidence in favour of regionalisation over globalisation is not persuasive.
Our classification scheme provides a useful framework to contribute to this debate. In Table 5 we
provide a breakdown of multinationality for our data set by sales and subsidiaries separately (in
Panels A and B respectively), and also by country. A substantial proportion of the firms are purely
domestic (20 percent using sales as the measure of multinationality and 17 percent using
subsidiaries); there are relatively few regional firms (4 percent using sales and 11 percent using
subsidiaries); and most are trans-regional (73 percent using sales and 59 percent using
subsidiaries). While only 3 percent of our firms have global sales, 13 percent have global
subsidiaries. When the trans-regional firms are added together with the global firms, it is clear that
the vast majority operate beyond their home regions – 874 firms (76 percent) by sales and 838 (72
percent) by subsidiaries.
In contrast to the findings of Rugman and his co-authors, therefore, our classification scheme
suggests that in the G7 data set there are relatively few regional firms, the vast majority are trans-
regional, and there are a substantial proportion of global firms. Why are the findings so different
from those of Rugman and co-authors? First, our classification scheme includes all countries in
the world. Second, with the exception of Collinson and Rugman (2008), all of the Rugman studies
used sales as the sole depth measure of multinationality. It is clear from our sample that large
firms based in the G7 countries have a greater global reach in subsidiaries than in sales. Third, we
impose no activity thresholds. Our findings suggest that rather than being a ‘myth’, global
strategy is a reality of modern international business. As this debate continues, researchers could
use our classification scheme to construct larger and broader datasets – to include, for example,
listed firms from emerging regions. It could also be used to examine the issue in a narrower way;
for example, to examine the international reach of SMEs based in a particular country or region, or
to look more carefully at the extent of multinationality of firms in particular industries.
25

5.5 Business in developing and emerging markets
Developing and emerging markets now capture increasing proportions of worldwide inward and
outward FDI and trade, and are consequently the focus of much recent research (Wu and Strange,
2000; Buckley et al. 2001; Buckley and Ghauri, 2004; Khanna, Palepu and Sinha, 2005; Flores
and Aguilera, 2007; Kali and Reyes, 2007; Cuervo-Cazurra, 2008; Arregle, Beamish and Hébert,
2009; Gupta and Wang, 2009). MNCs from the ‘triad’ increasingly pursue strategies to overcome
the resource deficiencies and other limitations of doing business in developing countries, and firms
from developing and emerging economies analogously devise strategies to compete in their own
and developed markets (Aulakh, Kotabe and Teegen, 2000; Hoskisson et al. 2000; Agular et al.
2006; Seelos and Mair, 2007). Guillen and Garcia-Canal (2009) reviewed research on the
variously-labelled ‘new’, ‘emerging’ and ‘unconventional’ MNCs from emerging markets, and
how their rationales, paths and speeds of internationalisation differ from those of the more
traditional MNCs. These ‘new’ MNCs must deal with the disadvantage of being ‘latecomers’ in
addition to the liability of foreignness, but this is offset by specific skills such as project execution,
networking, and dealing with institutional weakness and political instability (Campa and Guillen,
1999; Aulakh, 2007; Goldstein, 2007; and Cuervo-Cazurra and Genc, 2008). Our classification
system provides a framework for examining a range of issues related to the regional, trans-regional
and global strategies of firms beyond the world’s developed economies. For example, researchers
could use our classification scheme to study the extent to which ‘new’ MNCs in Africa, Asia, and
Latin America internationalise within and beyond their regions. It could also be used to
investigate the pre-internationalisation strategies of small, young firms as well as the patterns of
internationalisation of emerging market INVs (Matthews and Zander, 2007). Researchers could
also use our scheme to inform the construction of firm-level samples with greater granularity in
order to examine entry mode choices and effects in developing and emerging markets.
5.6 Longitudinal studies
The prevailing theories of firm-level internationalisation, together with the many patterns of
internationalisation that are traced by firms of different age, size, industry and home country,
suggest that there is no standard or optimal path of international expansion (Buckley and
Chapman, 1997; Fillis, 2001). Whether firms internationalise slowly according to one or more of
the stages theories of internationalisation, or rapidly according to INVT, the common dimension is
26

time. It seems surprising, therefore, that there have been relatively few longitudinal studies of
internationalisation. We believe that this will soon change. Contractor (2007) and Hennart (2007)
suggest that IB researchers should diversify away from an almost exclusive reliance on cross-
sectional data and embrace longitudinal studies as the best approach to achieving a more complete
understanding of the evolution of the MNC. Glaum and Oesterle (2007) advocate the benefits of a
longitudinal approach on the relation between firm-level multinationality and performance, and
Brouthers and Hennart (2007) and Canabal and White (2008) suggest that longitudinal data should
be used in studies of entry mode. As illustrated in section 4.1 – with three examples of firms that
follow different paths of internationalisation – our classification scheme is well placed for use as a
framework for longitudinal analysis of firm internationalisation. Researchers can use the scheme
to construct appropriate samples and to trace the processes and paths internationalisation as firms
proceed across the matrix of firm multinationality. Researchers could also use our framework to
study the patterns, processes and consequences of de-internationalisation. Finally, given its
usefulness for studying patterns of international business over time, our classification scheme
provides a framework for historical analysis of MNCs (Jones and Khanna, 2006).
6. Concluding comments
A distinguishing feature of the IB discipline is the use of alternative theoretical frameworks to

approach empirical questions at different levels of analysis – the industry, the firm, its
management, and other stakeholders (Buckley and Lessard, 2005). The domain of questions
spanned by the discipline includes but is not restricted to the activities, strategies, and structures of
MNCs, and the interactions between them and other firms, governments and civil society. In this
paper, we have focussed on one level of analysis – the firm. From a comprehensive review of all
papers published in the top international business and management journals that have used
empirical MNC samples to study a wide range of questions, we have shown that the degree of
firm-level multinationality – which is one of the discipline’s most important dimensions – is not
tied down. The absence of an agreed approach to operationally defining or measuring
multinationality at the level of the firm is reflected in a lack of consistency in how IB scholars
think about both high-level and domain-specific theory building and testing. This has hampered
the development of the discipline by stymieing innovation in theory and causing confusion in
27

empirical testing. This in turn has curtailed the validation or rejection and refinement of existing
theory – a process that is essential for scientific advancement.
Given the complex and dynamic IB landscape with its rich ecology of firms of varying age, size,
industry, strategy and international scope, it is unlikely that agreement can be reached on a single
definition of the term MNC. IB scholars should instead seek agreement on a classification system
for the degree of firm-level multinationality that can be used to classify all firms with respect to
the extent of their international involvement. In this paper, we have sought to establish the
benefits to the discipline of agreeing upon such a classification system. We have demonstrated
how such a scheme can encompass the prevailing theories and typologies of firm-level
internationalisation while facilitating improved sample selection and testing in empirical research.
We have pointed to the need for empirical researchers across the range of IB sub-disciplines to
think more clearly about their sample populations and the tradeoffs between narrowly versus
broadly defined samples, and the specificity versus the generalisability of their results. We have
used our matrix of firm multinationality to suggest avenues for research that have the potential to
settle old debates, facilitate historical and longitudinal analysis at the level of the firm, and open up
new avenues of investigation.
Our proposed scheme facilitates managers, researchers, teachers and students to observe the
landscape of IB. We have proposed a simple matrix of firm multinationality, and we hope that
other researchers will build on this work and contribute to a more coherent and consistent
epistemology and methodology in IB discourse and research. Research on designing and refining
classification systems is now common in the arts, humanities and social sciences – mainly due to
the expanding availability of data. Increasing numbers of discipline-specific and interdisciplinary
journals are devoted to developments in classification, ontology, taxonomy and typology, as well
as to the computational, mathematical and statistical methodologies such as cladistics, clustering,
neural networks and numerical taxonomy that are used to identify groups within large data sets.8
Although classification systems have been used in the business and management disciplines, the
8
Examples of interdisciplinary journals include Advances in Data Analysis and Clustering; Cladistics; and Journal of
Classification.
28

more advanced quantitative methodologies have not yet been widely used.9 Given the increasing
availability of large firm-level datasets, future research could usefully build on these techniques to
construct enhanced classification systems of MNCs across a variety of dimensions in addition to
their degree of multinationality.
9
Exceptions include factor analysis in logistics (McGinnis and Kohn, 1990); cluster analysis in strategic management
(Ketchen and Shook, 1996) and innovation systems (Peneder, 2010); cladistics in manufacturing systems (McCarthy
et al.; 2000); and neural networks to classify MNCs (Ahmad, Zheng and Kearney, 2008).
29

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Whitley, R. (2009). U.S capitalism: A tarnished model? Academy of Management Perspectives,

23/2, 11-22.
Wu, X. and Strange, R. (2000). The location of foreign insurance companies in China.
International Business Review, 9/3, 383-398.
Xu, S., Cavusgil, T. and White, C. (2006). The impact of strategic fit among strategy, structure and
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International Marketing, 14/2, 1-31.
Yip, G. (2002). Total global strategy II, New Jersey: Prentice Hall.
40

Table 1 Defining MNCs in IB research
Panel A: Variables used to operationally define MNCs
Single-attribute Multi-attribute Total
Performance definitions
Subsidiaries 163 47 210
Sales 62 56 118
Foreign assets 2 6 8
Foreign production 3 4 7
Foreign joint ventures 3 2 5
Foreign income 1 3 4
International transactions 2 1 3
Foreign investments 1 2 3
Mergers and acquisitions 1 0 1
Structural definitions
Foreign employees 1 9 10
Foreign exchange listing 1 5 6
Industry details 1 3 4
Foreign equity 2 2 4
Foreign taxation 0 2 2
Global accounts 0 1 1
Behavioural definitions
Research and development 2 2 4
International marketing 0 2 2
World mandates 0 1 1
Patents 1 0 1
Unclear 18 7 25
Total 264 155 419
Panel B: Data sources used to classify MNCs

The Fortune List 55
Directory of Japanese Overseas Affiliates 17
Standard and Poor’s Compustat 13
Dun and Bradstreet International Database 12
International Directory of Corporate Affiliations 12
Moodys Directory of Corporate Affiliations 9
The Forbes List 8
Corporate Families and International Affiliates 7
Individual Stock Exchange Publications 7
Directory of American Firms Operating in Foreign Countries 6
Directory of International Affiliations 6
World Directory of Multinatinal Enterprises 5
US Bureau of Economic Analysis 4
Who Owns Whom 4
The Financial Times Global 500 List 3
Centre for Research on Security Prices Database 2
Directory of Foreign Invested Enterprises 2
Electronics Manufacturing Firms in Asia 2
Global Business 1000 List 2
Notes. Panel A lists 17 attributes that have been used to create operational definitions of MNCs in 393 studies published
during 1987 to 2007 in the Academy of Management Journal (10 studies), Academy of Management Perspectives (4),
International Business Review (45), International Marketing Review (7), Journal of International Business Studies (133
studies, from 1970 to 2007), Journal of International Management (25), Journal of International Marketing (8), Journal of
Management (6), Journal of Management Studies (8), Journal of Marketing (3), Journal of Marketing Science (0), Journal
of World Business (13), Management International Review (89), and Strategic Management Journal (42). The total of 419
for this column exceeds the number of studies because many studies used multi-attribute definitions. Panel B lists 19 data
sources that have been used by a minimum of two of these studies.
41

Table 2 Country constituents of each region
Africa (53):
Algeria, Angola, Benin, Botswana, Burkina, Burundi, Cameroon, Cape Verde,
Central African Republic, Chad, Comoros, Congo, Congo (Dem. Rep.), Djibouti,
Egypt, Equatorial Guinea, Eritrea, Ethiopia, Gabon, Gambia, Ghana, Guinea,
Guinea-Bissau, Ivory Coast, Kenya, Lesotho, Liberia, Libya, Madagascar,
Malawi, Mali, Mauritania, Mauritius, Morocco, Mozambique, Namibia, Niger,
Nigeria, Rwanda, Sao Tome and Principe, Senegal, Seychelles, Sierra Leone,
Somalia, South Africa, Sudan, Swaziland, Tanzania, Togo, Tunisia, Uganda,
Zambia, Zimbabwe.
Asia (44):
Afghanistan, Bahrain, Bangladesh, Bhutan, Brunei, Burma, Cambodia, China,
East Timor, India, Indonesia, Iran, Iraq, Israel, Japan, Jordan, Kazakhstan, Korea,
(north), Korea (south), Kuwait, Kyrgyzstan, Laos, Lebanon, Malaysia, Maldives,
Mongolia, Nepal, Oman, Pakistan, Philippines, Qatar, Saudi Arabia, Singapore,
Sri Lanka, Syria, Tajikistan, Thailand, Turkey, Turkmenistan, United Arab
Emirates, Uzbekistan, Vietnam, Yemen.
Europe (47):
Albania, Andorra, Armenia, Austria, Azerbaijan, Belarus, Belgium, Bosnia and
Herzegovina, Bulgaria, Croatia, Cyprus, Czech Republic, Denmark, Estonia,
Finland, France, Georgia, Germany, Greece, Hungary, Iceland, Ireland, Italy,
Latvia, Liechtenstein, Lithuania, Luxembourg, Macedonia, Malta, Moldova,
Monaco, Montenegro, Netherlands, Norway, Poland, Portugal, Romania, Russian
Federation, San Marino, Serbia, Slovakia, Slovenia, Spain, Sweden, Switzerland,
Ukraine, United Kingdom, Vatican City.
North and Central America (23):

Antigua & Barbuda, Bahamas, Barbados, Belize, Canada, Costa Rica, Cuba,
Dominica, Dominican Rep., El Salvador, Grenada, Guatemala, Haiti, Honduras,
Jamaica, Mexico, Nicaragua, Panama, St. Kitts and Nevis, St. Lucia, St. Vincent
and the Grenadines, Trinidad &, Tobago, United States.
Oceania (14):
Australia, Fiji, Kiribati, Marshall Islands, Micronesia, Nauru, New Zealand,
Palau, Papua New Guinea, Samoa, Solomon Islands, Tonga, Tuvalu, Vanuatu.
South America (12):

Argentina, Bolivia, Brazil, Chile, Colombia, Ecuador, Guyana, Paraguay, Peru,
Suriname, Uruguay, Venezuela.
Notes: This table places the world’s 193 countries into our 6 continent-based
regions. The list includes all countries that are recognised by the United Nations,
and excludes dependencies and territories.
42

Table 3 Classifying firms by multinationality: 16 firm types
Category Symbol Description Count %
Purely domestic firms

1 SD-ID Domestic sales and subsidiaries 107 11
Regional firms
2 SR-ID Regional sales, domestic subsidiaries 14 1
3 SD-IR Domestic sales, regional subsidiaries 28 3
4 SR-IR Regional sales and subsidiaries 14 1
Total regional 56 5
Trans-regional firms
5 ST-ID Trans-regional sales, domestic subsidiaries 17 2
6 ST-IR Trans-regional sales, regional subsidiaries 17 2
7 SD-IT Domestic sales, trans-regional subsidiaries 73 7
8 SR-IT Regional sales, trans-regional subsidiaries 41 4
9 ST-IT Trans-regional sales and subsidiaries 538 53
Total trans-regional 686 68
Global firms
10 SG-ID Global sales, domestic subsidiaries 2 0
11 SG-IR Global sales, regional subsidiaries 0 0
12 SG-IT Global sales, trans-regional subsidiaries 53 5
13 SD-IG Domestic sales, global subsidiaries 4 0
14 SR-IG Regional sales, global subsidiaries 4 0
15 ST-IG Trans-regional sales, global subsidiaries 87 9
16 SG-IG Global sales and investments 16 2
Total global 166 16
Notes. This table expands the matrix of multinationality into 16 firm types: purely domestic
firms (SD-ID) (number 1), three categories of regional firm (numbered 2 to 4), five categories
of trans-regional firm (5 to 9), and seven categories of global firm (10 to 16). The two
columns on the right apply the classification system to the 1,015 firms from Canada (44),
France (91), Germany (91), Italy (107), Japan (156), UK (81) and USA (453), for which both
international sales and subsidiary data are available.
43

Table 4 The 100 largest G7 firms
(1) (2) (3) (4) (5) (6) (7) (8) (9)

Rank Firm Industry Age Size Location Sales Subs Category
1 Exxon Mobil Oil & Gas 1870 328.21 US T2 G 15 ST-IG

2 Wal-Mart Consumer Goods 1962 312.43 US T2 T4 9 ST-IT
3 BP Oil & Gas 1908 250.32 Britain T3 G 15 ST-IG
4 General Motors Consumer Services 1908 192.60 US T4 G 15 ST-IG
5 Toyota Motors Consumer Goods 1937 191.31 Japan T4 G 15 ST-IG
6 Daimlerchrysler Consumer Goods 1903 186.37 Germany T5 G 15 ST-IG
7 Chevron Oil & Gas 1879 184.92 US T2 T5 9 ST-IT
8 Ford Motor Consumer Services 1903 177.09 US T3 G 15 ST-IG
9 Conocophillips Oil & Gas 1875 162.41 US T3 T4 9 ST-IT
10 Total Oil & Gas 1924 152.58 France T5 T2 9 ST-IT
11 General Electric Industrials 1879 148.02 US T5 G 15 ST-IG
12 Citigroup Financials 1812 120.28 US T3 G 15 ST-IG
13 Volkswagen Consumer Goods 1937 118.55 Germany G G 16 SG-IG
14 Allianz Financials 1890 115.97 Germany T4 G 15 ST-IG
15 AIG Financials 1919 109.29 US T3 T5 9 ST-IT
16 AXA Financials 1817 106.75 France T4 T5 9 ST-IT
17 Generali Financials 1831 95.69 Italy R1 D 2 SR-ID
18 Siemens Industrials 1847 93.88 Germany T5 G 15 ST-IG
19 Hsbc Hldgs Financials 1865 92.84 Britain T4 G 15 ST-IG
20 Carrefour Consumer Services 1957 92.70 France T4 T4 9 ST-IT
21 ENI Oil & Gas 1953 91.68 Italy G T5 12 SG-IT
22 IBM Technology 1888 91.13 US T3 G 15 ST-IG
23 Honda Motor Consumer Goods 1948 90.11 Japan T4 G 15 ST-IG
24 Mckesson Health Care 1833 88.05 US T2 T3 9 ST-IT
25 Hewlett-Packard Technology 1939 86.70 US T2 T5 9 ST-IT
26 Hitachi Industrials 1910 86.07 Japan T4 G 15 ST-IG
27 Nissan Motors Consumer Goods 1932 85.74 Japan T4 T5 9 ST-IT
28 Bank Of America Financials 1928 85.06 US T5 T5 9 ST-IT
29 Valero Energy Oil & Gas 1980 82.16 US T2 R1 6 ST-IR
30 BNP Paribas Financials 1966 81.98 France G G 16 SG-IG
31 Credit Agricole Financials 1894 81.62 France G D 10 SG-ID
32 Home Depot Consumer Services 1978 81.51 US R1 T2 8 SR-IT
33 Cardinal Health Health Care 1971 81.36 US T2 T5 9 ST-IT
34 JPMorgan Chase Financials 1799 79.90 US G G 16 SG-IG
35 HBOS Financials 1695 76.60 Britain T2 T4 9 ST-IT
36 Deutsche Bank Financials 1870 75.82 Germany T5 G 15 ST-IG
37 Verizon Telecommunications 1885 75.11 US T2 T2 9 ST-IT
38 Prudential Financials 1848 74.83 Britain T3 G 15 ST-IG
39 Deutsche Telekom Telecommunications 1871 74.17 Germany T3 T5 9 ST-IT
40 Aviva Financials 1696 72.75 Britain T3 T3 9 ST-IT
41 RBOS Financials 1727 71.89 Britain T3 T4 9 ST-IT
42 Tesco Consumer Services 1919 71.79 Britain T2 T2 9 ST-IT
43 Peugeot Consumer Goods 1882 70.02 France T3 T5 9 ST-IT
44 Metro Consumer Services 1964 69.34 Germany T3 T3 9 ST-IT
45 Altria Group Consumer Goods 1860 68.92 US T3 G 15 ST-IG
46 Procter & Gamble Consumer Goods 1837 68.22 US T2 G 15 ST-IG
47 Societe Generale Financials 1864 64.53 France G G 16 SG-IG
48 E On Utilities 1929 64.52 Germany T3 T4 9 ST-IT
49 EDF Utilities 1946 63.54 France T2 T2 9 ST-IT
50 France Telecom Telecommunications 1988 61.02 France T2 G 15 ST-IG
51 Kroger Consumer Goods 1883 60.55 US D D 1 SD-ID
52 Muenchener Ruck Financials 1880 58.91 Germany T5 T4 9 ST-IT
53 Marathon Oil Oil & Gas 1887 58.60 US T3 T2 9 ST-IT
54 Fiat Consumer Goods 1899 57.92 Italy T4 G 15 ST-IG
55 Toshiba Industrials 1875 57.69 Japan T4 T5 9 ST-IT
56 Legal & General Financials 1836 56.39 Britain T2 T2 9 ST-IT
57 Dell Technology 1984 55.91 US T4 T5 9 ST-IT
58 Nippon Oil Oil & Gas 1888 55.64 Japan T4 T4 9 ST-IT
59 Deutsche Post Industrials 1490 55.49 Germany T5 G 15 ST-IG
60 Lloyds TSB Financials 1765 55.47 Britain D T4 7 SD-IT
44

Table 4 (continued) The 100 largest G7 firms
(1) (2) (3) (4) (5) (6) (7) (8) (9)

Rank Firm Industry Age Size Location Sales Subs Category
61 Boeing Industrials 1916 54.84 US G T4 12 SG-IT

62 Amerisourcebergen Health Care 1907 54.58 US D D 1 SD-ID
63 Vodafone Group Telecommunications 1983 53.40 Britain T3 T5 9 ST-IT
64 Basf Basic Materials 1865 53.19 Germany T5 G 15 ST-IG
65 Costco Consumer Goods 1983 52.94 US T2 T3 9 ST-IT
66 Target Consumer Services 1962 52.62 US D T3 7 SD-IT
67 Thyssenkrupp Industrials 1860 52.34 Germany T3 G 15 ST-IG
68 Morgan Stanley Financials 1935 52.08 US T4 T4 9 ST-IT
69 Suez Utilities 1858 51.63 France T5 G 15 ST-IG
70 Renault Consumer Goods 1899 51.44 France T5 G 15 ST-IG
71 Pfizer Health Care 1849 51.30 US T3 G 15 ST-IG
72 Johnson & Johnson Health Care 1886 50.51 US T5 G 15 ST-IG
73 RWE Utilities 1990 50.42 Germany T4 G 15 ST-IG
74 Barclays Oil & Gas 1690 49.98 Britain T4 G 15 ST-IG
75 Merrill Lynch Financials 1914 47.78 US T5 T5 9 ST-IT
76 Dow Chemical Basic Materials 1897 46.31 US T3 T5 9 ST-IT
77 United Health Health Care 1977 45.36 US D D 1 SD-ID
78 Sojitz Industrials 1892 45.22 Japan T4 T5 9 ST-IT
79 Wellpoint Health Care 1900 45.15 US D D 1 SD-ID
80 Microsoft Technology 1975 44.28 US T2 G 15 ST-IG
81 Metlife Financials 1914 44.07 US T2 T4 9 ST-IT
82 Mitsubishi Industrials 1870 43.90 Japan T4 G 15 ST-IG
83 Nec Corporation Industrials 1899 43.88 Japan T2 G 15 ST-IG
84 AT&T Telecommunications 1983 43.86 US D T4 7 SD-IT
85 Time Warner Consumer Services 1990 43.65 US T4 G 15 ST-IG
86 Fujitsu Industrials 1935 43.57 Japan T5 G 15 ST-IG
87 Goldman Sachs Financials 1869 43.39 US T4 T3 9 ST-IT
88 CNP Assurances Financials 1857 43.27 France T2 R1 6 ST-IR
89 Lowe's Consumer Services 1946 43.24 US D D 1 SD-ID
90 United Parcel Service Industrials 1907 42.58 US T2 G 15 ST-IG
91 United Technologies Industrials 1929 42.28 US T4 G 15 ST-IG
92 Walgreen Consumer Goods 1901 42.20 US D D 1 SD-ID
93 Japan Tobacco Consumer Goods 1949 42.18 Japan T3 T3 9 ST-IT
94 Aeon Consumer Services 1758 40.29 Japan T3 T4 9 ST-IT
95 Tyco International Industrials 1962 39.73 US T4 T2 9 ST-IT
96 Glaxosmithkline Health Care 1902 39.41 Britain T3 G 15 ST-IG
97 Intel Technology 1968 38.83 US T4 T5 9 ST-IT
98 Safeway Consumer Goods 1915 38.42 US R1 R1 4 SR-IR
99 Medco Health Care 1668 37.87 US D D 1 SD-ID
100 Mitsui Industrials 1947 37.43 Japan T5 G 15 ST-IG
Notes. This table illustrates the application of the classification scheme to the
largest (by sales) 100 firms in our G7 sample, ranked by sales (column 1). The
columns provide the following information: company name (2), industry (3),
date of formation (4), size measured by sales in US$ billions (5), the location
of headquarters (6), the geographic categorisation of sales (7) and investments
(subsidiaries) (8), and the number category and description of degree of firm-
level multinationality (as in Table 3) (9).
45

Table 5 Are the G7 firms regional or global?
Canada France Germany Italy Japan UK US Total G7
Panel A: Sales
D 13 (23) 6 (6) 5 (5) 46 (30) 16 (9) 7 (8) 136 (29) 229 (20)
R1 7 (12) 8 (7) 3 (3) 7 (5) 5 (6) 10 (2) 40 (4)
T2 17 (30) 16 (15) 26 (27) 37 (24) 33 (20) 22 (24) 110 (23) 261 (23)
T3 10 (18) 23 (21) 19 (19) 16 (11) 45 (27) 16 (18) 78 (17) 207 (18)
T4 7 (12) 27 (25) 15 (15) 20 (13) 49 (29) 19 (21) 78 (17) 215 (19)
T5 3 (5) 21 (20) 24 (24) 17 (11) 25 (15) 14 (15) 48 (10) 152 (13)
T 37 (65) 87 (81) 84 (85) 90 (59) 152 (91) 71 (78) 314 (67) 835 (73)
G 6 (6) 7 (7) 9 (6) 7 (8) 10 (2) 39 (3)
Total 57 107 99 152 168 90 470 1143
Panel B: Subsidiaries
D 5 (12) 19 (18) 5 (5) 50 (36) 20 (9) 6 (7) 87 (18) 192 (17)
R1 20 (20) 13 (13) 31 (23) 6 (3) 13 (15) 34 (7) 117 (10)

R2 1 (1) 3 (3) 4 (3) 8 (1)
R 21 (21) 16 (16) 35 (26) 6 (3) 13 (15) 34 (7) 125 (11)
T2 16 (37) 9 (9) 19 (19) 19 (14) 29 (14) 11 (12) 75 (16) 178 (15)

T3 11 (25) 15 (15) 17 (17) 13 (10) 58 (28) 12 (14) 70 (15) 196 (17)
T4 8 (19) 14 (14) 9 (9) 6 (4) 53 (25) 14 (16) 67 (14) 171 (15)
T5 2 (5) 5 (5) 7 (7) 4 (3) 28 (13) 13 (15) 85 (18) 144 (12)
T 37 (86) 43 (42) 52 (52) 42 (31) 168 (80) 50 (57) 297 (63) 689 (59)
G 1 (2) 19 (19) 26 (27) 10 (7) 16 (8) 19 (21) 58 (12) 149 (13)
Total 43 102 99 137 210 88 476 1155
Notes. In this table we categorise the G7 firms using our classification system, reporting figures for the
sales (Panel A) and subsidiaries (Panel B) depth dimensions separately, with percentages in brackets. Of
the 1,289 G7 firms in the initial sample, data were available on the geographic spread of sales for 1,143
and of subsidiaries 1,155. The breadth dimensions are D, R1, R2, T2, T3, T4, T5 and G. We add together
data for regional firms (R) and trans-regional firms (T) overall; adding together the numbers in bold gives
the total for each column. (There are no R3 firms in subsidiaries, and all of the regional (R) firms in sales
are R1).
46

Figure 1 Possible internationalisation paths
SD-ID SR-ID ST-ID SG-ID
SD-IR SR-IR ST-IR SG-IR

Deeper engagement
SD-IT SR-IT ST-IT SG-IT
SD-IG SR-IG ST-IG SG-IG
Broader geographical spread
Example 1: Shallow internationalisation in stages

Example 2: Balanced internationalisation in stages
Example 3: Deep internationalisation in stages
Example 4: Rapid shallow internationalisation
Example 5: Born trans-regional
47

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What is a multinational corporation?

Classifying the degree of firm-level multinationality

Forthcoming in International Business Review

Raj Aggarwal1, Jenny Berrill2, Elaine Hutson3 and Colm Kearney4

In section 3, we construct a simple classification system for the degree of firm-level

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2. Defining MNCs in IB research

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Does firm-level multinationality affect performance?

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Do MNCs provide the benefits of international portfolio diversification?

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3. Classifying firms by multinationality

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A classification scheme is defined by Chrisman, Hofer and Boulton (1988) as:

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3.1 A classification system for firm-level multinationality

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Our matrix of firm multinationality acknowledges location as a pivotal dimension of

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3.2 Illustration of the classification scheme

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4. Implications for theory and testing

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Example 2: Balanced internationalisation in stages: SD-ID → SR-IR → ST-IT → SG-IG.

Example 3: Deep internationalisation in stages: SD-ID → SD-IR → SD-IT → SD-IG. A

Example 4: Rapid shallow internationalisation: SR-ID → SG-ID. This describes the

Example 5: Born trans-regional: ST-IR → SG-IR → SG-IT. This describes the

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4.1 Implications for sample selection

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In addition to providing a framework for empirical testing of high-level internationalisation

5.1 Standardised marketing strategies and MNC performance

5.2 Firm-level multinationality and foreign exchange exposure

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5.3 Firm-level multinationality and performance

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5.4 The regional/global debate

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5.6 Longitudinal studies

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A distinguishing feature of the IB discipline is the use of alternative theoretical frameworks to

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Agmon, T. and Lessard, D. (1977). Investor recognition of corporate international diversification.

Aharoni, Y. (1971). On the definition of a multinational corporation. Quarterly Review of

Ahmad, K., Zheng, C. and Kearney, C. (2008). A hierarchical self-organised classification of

Allen, L. and Pantzalis, C. (1996). Valuation of the operating flexibility of multinational

Archibugi, D. and Michie, J. (1995). The globalisation of technology: a new taxonomy.

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