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Pitting real options theory against risk diversification theory: International diversification and joint ownership control in economic crisis

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  • Chung, Chris Changwha
  • Lee, Seung-Hyun
  • Beamish, Paul W.
  • Southam, Colette
  • Nam, Daeil (Dale)
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    Abstract

    This study examines how MNE divestment decisions differ according to real options vs. risk diversification perspectives. We develop competing hypotheses in relation to international diversification and joint ownership control. Empirical results give consistent support to the real options perspective. We find that large MNEs with greater international diversification are less likely to divest their subsidiaries during times of economic crisis. The negative effect of joint ownership control is however manifested in both crisis-stricken and non-crisis country subsidiaries as well as in their interaction effect.

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    Bibliographic Info

    Article provided by Elsevier in its journal Journal of World Business.

    Volume (Year): 48 (2013)
    Issue (Month): 1 ()
    Pages: 122-136

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    Handle: RePEc:eee:worbus:v:48:y:2013:i:1:p:122-136

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    Related research

    Keywords: Real options; Risk diversification; Economic crisis; International diversification; Joint ventures; Subsidiary divestment;

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    Cited by:
    1. Xiao, Simon Shufeng & Jeong, Insik & Moon, Jon Jungbien & Chung, Chris Changwha & Chung, Jaiho, 2013. "Internationalization and Performance of Firms in China: Moderating Effects of Governance Structure and the Degree of Centralized Control," Journal of International Management, Elsevier, vol. 19(2), pages 118-137.

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