South African multinational enterprises' performance and the multinationality effect between 2005 - 2015

Abstract

Emerging markets' share of global foreign direct investment reached a record high of 35% in 2014 up from 13% in 2007. In 2013 South Africa was the only country in Africa whose FDI outflows exceeded USD 3 billion resulting in a surge of emerging market multinational enterprise investments. This inquiry investigates the moderating effects of firm factors and geographical distance on the multinationality-performance relationship. Using internationalisation theory lens, the literature explores MNEs and local firm, the internationalisation process, internationalisation strategies and how the evolution of MNEs and its impact on multinationality - performance relationship. This inquiry used Pearson Correlation hypothesis testing to determine whether firm factors, the degree of internationalisation and geographical distance influence the multinationality - performance relationship. Financial data from 81 South African listed companies from 8 industries was tested via three multiple regression models. Firm-specific factors were found to be more influential than the degree of internationalisation and geographical distance on MNE performance. Firm age, experience, technology, management capabilities and knowledge base were found to have a greater effect on performance, rather than access to multiple emerging markets contradicting the literature. These findings add to the internationalisation theory and international business literature. The study proposes an internationalization model to assist managers to shape an integrative expansion strategy for market expansion and reduce the associated risks.