Journal
JOURNAL OF INTERNATIONAL BUSINESS STUDIES
Volume 38, Issue 2, Pages 215-230Publisher
PALGRAVE MACMILLAN LTD
DOI: 10.1057/palgrave.jibs.8400260
Keywords
real options; multinational corporations; foreign direct investment; down-side risk
Categories
Ask authors/readers for more resources
In this study, we investigate how multinationality affects firms' risk levels. Our investigation builds on the idea from real options theory that international operations offer switching options to multinational corporations, yet we also emphasize different sources of coordination costs that can mitigate the benefits of operational flexibility. The findings from Tobit models accounting for self-selection underscore the importance of unobserved heterogeneity in the relationships between international investments and risk levels. Consistent with the coordination costs surrounding international operations, we find that the relationship between multinationality and downside risk is curvilinear: risk first declines and then increases as a firm's portfolio of international investments becomes extensive. In addition, downside risk is an increasing function of the average cultural distance between a firm's home base and the host countries in which its foreign subsidiaries operate.
Authors
I am an author on this paper
Click your name to claim this paper and add it to your profile.
Reviews
Recommended
No Data Available