Universität zu Köln Seminar für Allgemeine BWL, Risikomanagement und V ersicherungslehre A Dynamic Resource-based Perspective on the State of International Business: Evidence from German Insurance Croups Inauguraldissertation zur Erlangung des Doktorgrades Dr. rer. pol. der Wirtschafts- und Sozial wissenschaftlichen Fakultät der Universität zu Köln vorgelegt von Dipl.-Wirt.-Inf. Gerrit Gößmann
II TABLE OF CONTENTS Table of Contents Table of Abbreviations List of Figures Listof Tables 1. Introduction 11 1.1. Relevanceof Research 11 1.2. Research Objective and Definition of Research Questions 15 1.3. Way of Work 18 2. Conceptual Foundations.. 21 2.1. Research Object: International Property-Liability Business 21 2.1.1. Characterization of Property-Liability Insurance Business 21 II VII 2.1.1.1. Definition of Home Market Business 22 2.1.1.2. Definition of International Business 24 2.1.1.3. Definition of Internationalization 25 2.1.1.4. Definition of the Degree of Internationalization 26 2.1.1.5. Definition of International Expansion Strategy 27 2.1.1.6. Definition of Firm-Specific Success 30 2.1.2. The German Property-Liability Insurance Market 32 2.2. Market Entiy Literature 33 2.2.1. Model of Entry Modes 34 2.2.1.1. Market Categorization 35 2.2.1.2. Entrant Categorization 37 2.2.2. Market Entry Model for German Insurers 41 2.2.2.1. Subsidiary 44 2.2.2.2. Location 46 2.2.2.3. Attendance 47 2.2.2.4. Contracting 48 3. Theoretical Background 50 3.1. Conception of a Theoretical Framework 50 3.1.1. Strategie Portfolio Analysis 52 3.1.1.1. Diversification Framework by Ansoff 53 IX X
3.1.1.2. BCG Matrix 56 3.1.1.3. McKinsey Matrix 57 3.1.2. Adapted Internationalization Framework 58 3.1.2.1. Domestic Underperformer 62 3.1.2.2. Domestic Complacent 62 3.1.2.3. Domestic Performer 62 3.1.2.4. Advanced International Market Greenhorn 63 3.1.2.5. Advanced International Market Developer 63 3.1.2.6. Advanced International Market Star 64 3.1.2.7. Emerging Market Greenhorn 64 3.1.2.8. Emerging Market Developer 65 3.1.2.9. Emerging Market Star 65 3.1.3. The Dynamic Resource-Based View 66 3.1.3.1. Definition ofdynamic Capabilities 66 3.1.3.2. The Capability Lifecycle 67 3.1.4. Insurers Dynamic Capabilities 69 3.1.4.1. International Insurance Coverage Capability 70 3.1.4.2. Market Entry Capability 71 3.1.4.3. Restructuring Capability 73 3.1.4.4. International Risk-Bearing Capacity 74 3.1.4.5. Insurers Capabilities and the Internationalization Framework.75 3.1.4.6. Discussion and Limitations of Dynamic Capabilities 77 3.2. Literature Review 78 3.2.1. Related Literature on Internationalization in the Insurance Industry 79 3.2.1.1. Findings about Internationalization 79 3.2.1.2. Industry and Country-specific Factors 83 3.2.1.3. Firm-specific Factors 84 3.2.1.4. Internationalization Characteristics ofthe Insurance Industry..87 3.2.1.5. Discussion 90 3.2.2. Market Entry Literature and Framework 92 3.2.2.1. Subsidiäres in the Context of Market Entry 92 3.2.2.2. Locations in the Context of Market Entry 94 3.2.2.3. Attendance Business in the Context of Market Entry 94 3.3. Hypothesis Development 95 3.3.1. Home Market Performance Hypothesis 96 III
IV 3.3.2. Catch-up Convergence Hypothesis 98 3.3.3. Foreign Market Convergence Hypotheses 99 3.3.3.1. Equity Market Entry Mode Convergence Hypothesis 99 3.3.3.2. Market Entry Intensity Convergence Hypothesis 101 3.3.3.3. Foreign Strategy Convergence Hypothesis 102 3.3.4. Degree of Internationalization Hypothesis 103 3.3.5. Foreign Market Dependence Hypothesis 103 4. Data and Methodology 105 4.1. Data 105 4.1.1. Cross-sectional Data 105 4.1.2. Structure of Econometric Data 105 4.1.2.1. Time Series Data 106 4.1.2.2. Panel / Longitudinal Data 106 4.2. Sample Data 107 4.2.1. Industry Choice and Observation Period 107 4.2.2. Sample Construction 109 4.2.3. Discussion 110 4.2.3.1. Country Sample 110 4.2.3.2. Observation Period 111 4.2.3.3. Segment Choice 111 4.2.3.4. Contribution 112 4.3. Methodology 112 4.3.1. Simple Regression Analysis 112 4.3.2. Ordinary Least Squares Estimation 113 4.3.3. Multiple Regression Analysis 115 4.3.4. Discrete Choice Models 116 4.3.5. Logistic Regression 118 4.3.6. Ordered Logistic Regression 118 4.4. Variables and Models 119 4.4.1. Dependent Variables 119 4.4.1.1. Home Market Performance 119 4.4.1.2. Degree of Internationalization 122 4.4.1.3. International Combined-Ratio 123
4.4.2. Control Variables 124 4.4.2.1. Mutual 124 4.4.2.2. Size 124 4.4.2.3. Age 125 4.4.2.4. Solvency 126 4.4.2.5. Reinsurance 126 4.4.2.6. Assetrisk 127 4.4.2.7. Product Diversification 127 4.4.2.8. Life/Health 128 4.4.3. Models 129 4.4.3.1. Home Market Performance Model 129 4.4.3.2. Catch-up Convergence Model 130 4.4.3.3. Foreign Market Convergence Models 130 4.4.3.4. Degree of Internationalization Model 133 4.4.3.5. Foreign Market Dependence Model 134 5. Results 135 5.1. Univariate Analysis 135 5.2. Multivariate Analysis 137 5.2.1. Logistic Regression of Home Market Performance on Internationalization 137 5.2.2. Choice of Foreign Market Entry Mode 139 5.2.3. Choice of Foreign Market Entry Mode and Strategy on the Degree of Internationalization 142 5.2.3.1. Equity based Market Entry and Degree of Internationalization 142 5.2.3.2. Market Entry Mode Choice and Degree of Internationalization 143 5.2.3.3. Foreign Strategy Choice and Degree of Internationalization.. 144 5.2.4. Degree of Internationalization and Home Market Performance 145 5.2.5. Foreign Market Dependence and Performance 146 5.3. CaseExamples 148 5.3.1. A Descriptive Look on Internationalized German Property-Liability Insurers 148 5.3.1.1. German Insurers' State of Internationalization 149 5.3.1.2. Gross written Premiums in International Markets 149 V
VI 5.3.1.3. Premium Concentration in International Insurance Business. 152 5.3.1.4. State of Insurers' Market Entry Modes 155 5.3.1.5. Foreign Market Strategy 156 5.3.1.6. Host Regions 158 5.3.1.7. Distribution Structure 163 5.3.1.8. Lines-of-Business 165 5.3.1.9. Customer Focus 166 5.3.1.10.Management of Foreign Insurance Business 167 5.3.1.1 l.importance of International Business 169 5.3.2. Assessment of International Involvement 170 5.3.2.1. Winner 170 5.3.2.2. Newcomer 170 5.3.2.3. Complacent 171 5.3.2.4. Loser 171 6. Conclusion 173 6.1. Summary 173 6.2. Contributions 174 6.3. Implications 177 6.4. Limitations 178 6.4.1. Home Market Performance Hypothesis 178 6.4.2. Catch-up Convergence Hypothesis 179 6.4.3. Foreign Market Convergence Hypotheses 180 6.4.4. Degree of Internationalization Hypothesis 181 6.4.5. Foreign Market Dependence Hypothesis 182 6.5. Avenues for Future Research 182 Appendix 186 Robustness Tests 191 References 198