The purpose of this paper is to provide a critical discussion of the scope and correct scale metrics used in the measurement of multinationality.
There are two ways of measuring the degree of multinationality (sometimes called the international diversification) of firms. The literature is reviewed using both types of metric, and then both are applied to tests of the regional nature of international business.
It is found that the correct method is to use a scale metric which captures the degree of multinationality, such as the ratio of foreign to total sales. This paper provides empirical evidence that the scope metric, which counts the number of countries in which a firm has a foreign subsidiary, is unsatisfactory.
The paper provides a new scale metric of the intra‐regional activities of large US firms.
