A Note on Return on Foreign Assets and Foreign Presence for UK Multinationals*

AuthorAlan Rugman,George Yip,Saliya Jayaratne
Publication Date01 June 2008
A Note on Return on Foreign Assets and
Foreign Presence for UK Multinationals
Alan Rugman, George Yipwand Saliya Jayaratnez
Kelley School of Business, Indiana University, 1309 E. Tenth Street, Bloomington, IN 47401-1701, USA,
wCapgemini Consulting, 76–88 Wardour Street, London W1F 0UU, and London Business School, UK, and
zSaid Business School, University of Oxford, Park End Street, Oxford OX1 1HP, UK
Email: rugman@indiana.edu; george.yip@capgemini.com; saliya.jayaratne@said-business-school.oxford.ac.uk
Within the context of the international business literature on multinationality and
performance we develop new data on the foreign presence and performance of large UK
multinational enterprises (MNEs). There are 32 UK MNEs for which we can obtain
data on both their degree of multinationality (measured by the ratio of foreign to total
(F/T) sales) and their performance. Here, in addition to the traditional overall
performance of the firm, shown as return on total assets, we use new data on the return
on foreign assets (ROFA). We conduct analytical work to show the positioning of the
UK MNEs in the ROFA and F/T sales space and provide regression results showing a
linear relationship between multinationality and performance, using the new ROFA metric.
A neglected method of assessing the international
competitiveness of UK business is to study the
performance and strategic positioning of the 37
UK firms listed in the Fortune 500 ranking of the
world’s largest firms. Of these 37 firms, under a
dozen are in the manufacturing sector, whereas
the majority are in services. A study of these
successful world class firms would provide insight
into the nature of competitiveness in Britain.
Here we study the relationship between multi-
nationality and performance for these large UK
There are no previous studies which have
examined the performance of UK firms in the
manner attempted here, which is to test return on
foreign assets (ROFA). We discuss this further
below. Also no prior studies have examined the
relationship between ROFA and the return on
home assets (ROHA) and return on total assets
(ROTA), as we do here. We discuss and clarify
how geographic segment data can be used to
develop more accurate and statistically significant
performance measures for large and highly
geographically diverse multinational enterprises
(MNEs). We discuss the relevant literature on
multinationality and performance in the next
The literature on multinationality
and performance
The relationship between firm performance and
the degree of multinationality has been tested in
many previous studies in the international busi-
ness literature. This body of literature explores
the basic issue of whether multinationality,
defined as the geographic scope of international
activities of the MNE, improves the financial
performance of the firm. For a recent review see
Lu and Beamish (2004), Contractor, Kundu and
Hsu (2003), Tallman and Li (1996) and Hitt, Kim
and Hoskisson (1997). In theoretical terms, a
broad geographic scope of operations may yield
The authors thank the Economic and Social Research
Council, and Engineering and Physical Sciences Re-
search Council, for funding.
British Journal of Management, Vol. 19, 162–170 (2008)
DOI: 10.1111/j.1467-8551.2007.00536.x
r2007 British Academy of Management. Published by Blackwell Publishing Ltd, 9600 Garsington Road, Oxford
OX4 2DQ, UK and 350 Main Street, Malden, MA, 02148, USA.

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