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A New Perspective on the Multinationality-Performance Link. Illustrate your essay with specific examples.

With their article "A Note on Return on Foreign Assets and Foreign Presence for UK Multinationals" Rugman, Yip and Jayaratne (2008) contribute to the literature, studying the relationship between multinationality and performance. Using simple statistical regression analysis, they determine positive relationship between foreign performance (measured by return on foreign assets) and the degree of foreign presence (as reported by F/T sales). This study is differentiated from previous research by using ROFA as a measure and showing its applicability to judging a company's international competitiveness. Moreover, the article fills a gap in UK literature on multinationality and performance, which has formed for the prior fifteen years. Nevertheless, the study of Rugman, Yip and Jayaratne is somewhat limited in nature and does not provide direct insights into the usefulness of their conclusions. No connection is established with empirical evidence either and suggestions for increasing the sample size and representativeness, as well as incorporating additional factors, can be the basis for a more detailed further study on the subject.

The article examines the relationship between the degree of multinationality of firms and their performance by running a regression on data obtained from the 32 largest UK firms. Multinationality is measured by the F/T ratio (foreign/total sales), whereas performance is calculated using a variety of measures, from the more traditional ROTA (return on total assets) to the less commonly used ones ROFA and ROHA (return on foreign/home assets). This is the first research on UK international companies, which utilises ROFA to conclude that increased foreign presence has a positive effect on a company's profitability. Using statistical techniques, the authors arrive at the following formula, expressing the linear relationship:

A point that needs to be considered in every research is its relation with empirical results and whether real life phenomena actually confirm the findings. The authors of the article point out that a problem with previous studies has been their failure to establish a connection with empirical evidence.  No comment is made about their own research which may suggest that the problem still persists, so recommendations for including it as part of a further study seem viable.

The article "A Note on Return on Foreign Assets and Foreign Presence for UK Multinationals" by Rugman, Yip and Jayaratne (2008) makes a contribution to the literature on the multinationality-performance link, particularly for larger UK MNEs. Using ROFA, it offers an alternative approach to studying the relationship between the two measures and with effective statistical techniques, manages to demonstrate a positive correlation. Although using geographically segmented data on performance the study possesses significant potential, this potential does not seem to be properly developed.  The study suffers from many limitations and restrictions, which could be overcome by initiating a more extended research on the topic. Some points to consider are increasing the sample size and variety to ensure that greater representativeness of companies, varying in size, industry and degree of multinationality is achieved. Using figures for non-MNEs could also contribute to the conclusions and applicability of the research to commenting on the actual competitiveness of UK firms. Rather than helping in the debate on how performance is to be measured, the authors extend it by offering one more option, which if further developed, could potentially produce more specific and precise results.

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