The Penrose effect in the internationalization of professional service firms: an analysis of Japanese patent firms
Year: 2024
Type: article
Abstract: Purpose The Penrose effect, or the limitation of the growth rate during expansion due to managerial constraints, has been examined in the context of business diversification, withdrawal and MNE’s foreign direct investment, primarily in the for-profit sector. However, insufficient attention has been paid to its impact on professional service firms, particularly in the context of their expansion through service exports. The main purpose of this study is to examine the Penrose effect in the internationalization of professional service firms through service exports. Design/methodology/approach This study focuses on large Japanese patent firms as traditional professional service firms and constructs panel data for 48 large patent firms over the observation period from 2002 to 2010 to test our hypotheses. Findings Our results demonstrate a negative relationship between degree of internationalization and international business growth, thus confirming the Penrose effect. Furthermore, we found that the degree of internationalization has a curvilinear relationship with international business growth and that institutional distance does not have a negatively moderating effect on the relationship between the degree of internationalization and international business growth. Originality/value This study made a theoretical contribution to Penrose's growth theory and previous studies on international management and professional service firms and international management by showing that the Penrose effect can be observed in the international expansion of professional service firms through service exports. Moreover, this study identifies the factors that modify the Penrose effect, thereby making a significant theoretical contribution.
Language: English
Subfield: Strategy and Management
Domain: Social Sciences
Open Access status: hybrid
Awards: The Growth of Professional Service Firms: Approaches from Quantitative and Qualitative Research, Diving into Competitive Dynamics through the Integration of Social Capital and Awareness-Motivation-Capability Perspective, Analysis of organizational resilience capabilities of SMEs during Covid-19 Pandemic, An exploratory study of the integration processes of internal and external internationalization that enable the internationalization of non-profit organizations, How Professional Entrepreneurs Overcome Difficulties
OpenAlex ID: W4402679962