Highlights

Abstract

Keywords

۱٫ Introduction

۲٫ Theoretical underpinning and hypotheses

۳٫ Research methodology

۴٫ Results

۵٫ Conclusion and implications

CRediT authorship contribution statement

Appendix 1

References

Vitae

Abstract

This paper examines the impact of firm-level research and development (R&D) and country-level innovation on the relationship between geographic scope and financial performance. Using econometric estimation to analyze data from a sample of 339 United Kingdom (UK) service companies over the period from 2011 to 2017, we found a concave relationship between geographic scope and financial performance. Moreover, the results indicated that UK service companies that increase their R&D expenditure accrue a higher performance from higher geographic scope. This is because the relationship becomes convex but the foreign country’s innovation has no direct effect on UK service companies’ performance. Additional results showed that performance differences from geographic scope and the influence of firm-level R&D and country-level innovation exist between SMEs and large firms, and between private and public firms.

۱٫ Introduction

In today’s knowledge-based economy, innovation has emerged as the cornerstone of activities of many successful companies in both mature and emerging economies (see Afuah, 2009; Alnuaimi et al., 2012; Amankwah-Amoah, 2021; Dodgson et al., 2008; Mudambi, 2008). For many firms, innovation has long remained the “lifeblood” which buttresses their market competitiveness and ability to leapfrog market leaders (Alegre and Chiva, 2008; Balachandra and Friar, 1997;Biemans and Griffin, 2018). Accordingly, firms increasingly require innovation to not only revive failing products but to also avoid annihilation.

In recent decades, internet technologies coupled with declining cost of communication have provided ample opportunities for international businesses to innovate and create conditions that make success in foreign markets more likely (Amankwah-Amoah et al., 2021b; Cavusgil et al., 2020; Zhao et al., 2018). Extant literature has sought to understand some critical factors and contemporary issues in the international business environment that act as enablers for firms to enhance their performance (Castellani et al., 2018; Perlmutter, 2017). Of these, innovation, which is a reflection of research and development (R&D) in both firm-level and country-level activities, has long been the subject of intensive research enquiry (Eggert et al., 2015; Hausman, 2005; Woodside, 1995). Despite the important insights offered by past studies, there remains lack of clarity concerning the potential effects of firm-level R&D and host-country-level innovation activities on the performance of foreign geographic scope (i.e., the total number of foreign countries in which a firm operates). Specifically, there remains limited insight on whether firm-level R&D and host-country-level innovation could moderate the association between foreign geographic scope (FGS) and financial performance. Indeed, cross-national integration of firm activities can be hampered by host-country and location-specific conditions such as access to talent and cost of labor (Cavusgil et al., 2020).