Firm and target country characteristics as factors explaining wealth creation from international expansion moves of mobile network operators

Although mobile network operators (MNOs) carried out numerous international expansion moves over the past 25 years industry-specific empirical research on shareholder reactions to such moves and on factors explaining differences of the wealth effects of international expansion moves is scarce. Using event study methodology, the present investigation empirically captured the impacts of 148 major expansion steps into foreign mobile communication services markets announced by 29 large MNOs during the period from December 1989 to December 2004 on “abnormal” market value changes of the expanding MNO. Further, it sought to explain differences in cumulative abnormal shareholder returns related to an announcement by four characteristics of the expanding firm (e.g., foreign experience) and nine characteristics of the country targeted by an internationalization step (e.g., cultural distance; intensity of MNO regulation).On average, MNO internationalization move announcements had insignificant effects on the value of expanding MNOs’ stock suggesting that expansion into foreign mobile communication service markets is not assessed per se as a strategy contributing significantly to shareholder wealth changes of the expander. Most of the firm and target country characteristics did not consistently explain a significant proportion of MNO value change variance coinciding with an international expansion move across different types of analyses. Exceptions to this results pattern are the target country characteristics: (1) “competitive intensity” among the MNOs in the foreign country's mobile communication market; (2) share of metropolitan population in a target country; and (3) cultural distance between the home and target country as measured with the Schwartz dimensions. All three indicators displayed a significantly negative effect on the market value change of an internationally expanding MNO.