Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
1002198 | Journal of World Business | 2011 | 10 Pages |
Abstract
This paper develops a real option model to explain the decision of enlarging a new foreign subsidiary by subsequent investment. The model is tested on a panel of 1148 subsidiaries in 22 host countries. The findings complement the traditional process model of firm internationalization. Rather than abiding by an incremental pattern of investment, internationalizing firms seem to keep foreign investment strategies flexible and build up their subsidiaries contingent upon the interaction of economic volatility and irreversibility of investment. However, the moderating effect of irreversibility on the relationship between uncertainty and investment may not hold for downside risks such as political instability.
Keywords
Related Topics
Social Sciences and Humanities
Business, Management and Accounting
Business and International Management
Authors
Jan Hendrik Fisch,