Multinationality and firm value: The role of real options awareness

We contribute to multinationality and real options theories by considering the role of firm heterogeneity in real options awareness for MNCs. We test the joint impact of real options awareness (RO-AWN) and multinationality on firm value using an extensive sample of U.S.-listed international firms over the ten-year period 1996-2005. We show that when a firm's growth options and degree of RO-AWN are considered, multinationality has a significant positive impact on firm value and performance as measured by Tobin's Q, return-on-assets and the 3-year average stock returns. We find that the benefits of multinationality accrue asymmetrically to firms differing in RO-AWN. Managers who are more aware of their corporate real options are able to significantly enhance firm value. Our findings are robust to a range of dataset and measurement specifications, endogeneity issues and controlling for alternative theories of the firm.