How international physical presence and infrastructure differences moderate the link between digital internationalization and MNE performance

Abstract

While prior work has predominantly studied the performance implications of multinational enterprise (MNE) physical internationalization, research on how MNEs perform when simultaneously coordinating international digital channels and physical presence remains scarce. This challenge is particularly acute in retail, where the strategic convergence of born-digital retailers expanding physically and traditional retailers going digital creates new cross-domain challenges. Nonetheless, the impact of international physical presence and differences in home country physical infrastructure relative to host countries on MNE performance remains unexplored. Drawing on the integration-responsiveness (IR) framework, we suggest that a non-linear, U-shaped pattern governs the relationship between digital internationalization and performance for these retail MNEs, because the costs of integration and responsiveness are dominant at lower levels of internationalization while their advantages become more pronounced with increased internationalization. Further, we argue that the digital internationalization and MNE performance relationship steepens (a) with a higher international physical presence and (b) for firms originating from home countries with superior physical infrastructure relative to their host countries. Utilizing an 11-year panel of some of the largest retail MNEs, our research contributes to international strategy literature by extending the IR framework to a multidomain digital and physical context, stressing the strategic importance of firm- and country-level physical resources and infrastructure in digital internationalization.