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Multinational Investment under Uncertainty in the Chemical Processing Industries

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  • Jos� Manuel Campa

    (New York University)

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    Abstract

    This study uses a sample of chemical processing industries to evaluate the effect of two types of uncertainty on the decision to invest in an industry. It analyzes the effects of relative price uncertainty, through exchange rates and input prices, and demand uncertainty on the probability of expansion in a particular country. The study then focuses on the behavior of individual companies, and distinguishes companies by whether or not they are multinationals in the production of the product. The results confirm previous evidence that exchange rate uncertainty has a negative effect on capacity expansions by domestic corporations and no effect on investment by multinational corporations. Finally, the study also shows that expansions of production capacity in this industry are more likely to occur in those countries where capacity utilization is higher.© 1994 JIBS. Journal of International Business Studies (1994) 25, 557–578

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    Bibliographic Info

    Article provided by Palgrave Macmillan in its journal Journal of International Business Studies.

    Volume (Year): 25 (1994)
    Issue (Month): 3 (September)
    Pages: 557-578

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    Handle: RePEc:pal:jintbs:v:25:y:1994:i:3:p:557-578

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    Web page: http://www.palgrave-journals.com/

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    Cited by:
    1. Li, Yong & James, Barclay & Madhavan, Ravi & Mahoney, Joseph T., 2006. "Real Options: Taking Stock and Looking Ahead," Working Papers 06-0114, University of Illinois at Urbana-Champaign, College of Business.
    2. Driouchi, Tarik & Bennett, David, 2011. "Real options in multinational decision-making: Managerial awareness and risk implications," Journal of World Business, Elsevier, vol. 46(2), pages 205-219, April.
    3. Lee, Tan, 2004. "Determinants of the foreign equity share of international joint ventures," Journal of Economic Dynamics and Control, Elsevier, vol. 28(11), pages 2261-2275, October.
    4. Martin-Tapia, Inmaculada & Aragon-Correa, Juan Alberto & Senise-Barrio, Maria Eugenia, 2008. "Being green and export intensity of SMEs: The moderating influence of perceived uncertainty," Ecological Economics, Elsevier, vol. 68(1-2), pages 56-67, December.
    5. Bergman, Mats & Johansson, Per, 2000. "Strategic Investments in the Pulp and Paper Industry: A Count Data Regression Analysis," UmeÃ¥ Economic Studies 536, Umeå University, Department of Economics.
    6. Yongil Jeon & Taekwon Kim & Stephen M. Miller, 2004. "The Value of Waiting: Foreign Direct Investment with Uncertainty and Imperfect Local Knowledge," Working papers 2004-44, University of Connecticut, Department of Economics.
    7. Bergman, Mats A. & Johansson, Per & Bergman, M.A., 2002. "Large investments in the pulp and paper industry: a count data regression analysis," Journal of Forest Economics, Elsevier, vol. 8(1), pages 29-52.
    8. Dikova, Desislava & Smeets, Roger & Garretsen, Harry & Van Ees, Hans, 2013. "Immediate responses to financial crises: A focus on US MNE subsidiaries," International Business Review, Elsevier, vol. 22(1), pages 202-215.
    9. Desbordes, Rodolphe, 2007. "The sensitivity of U.S. multinational enterprises to political and macroeconomic uncertainty: A sectoral analysis," International Business Review, Elsevier, vol. 16(6), pages 732-750, December.
    10. Perry, Monica L. & Sengupta, Sanjit & Krapfel, Robert, 2004. "Effectiveness of horizontal strategic alliances in technologically uncertain environments: are trust and commitment enough?," Journal of Business Research, Elsevier, vol. 57(9), pages 951-956, September.

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