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Do firms benefit from multinationality through production shifting?

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  • Fisch, Jan Hendrik
  • Zschoche, Miriam

Abstract

Previous work shows that multinationality creates firm value due to the potential of multiple host countries to provide operational flexibility. This paper examines whether this value effect on the stock market is backed by a profitability effect of exercising operational flexibility through production shifting across countries. Our panel study of German MNCs confirms that production shifting due to local factor cost changes increases the profitability of international production networks. However, the results also suggest that production shifting from countries with rising labor costs to countries with falling labor costs is not prevalent in MNCs and is not related to the number of host countries. Implications for future research are given.

Suggested Citation

  • Fisch, Jan Hendrik & Zschoche, Miriam, 2011. "Do firms benefit from multinationality through production shifting?," Journal of International Management, Elsevier, vol. 17(2), pages 143-149, June.
  • Handle: RePEc:eee:intman:v:17:y:2011:i:2:p:143-149
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    References listed on IDEAS

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    2. repec:spr:manint:v:55:y:2015:i:1:d:10.1007_s11575-014-0233-4 is not listed on IDEAS
    3. repec:spr:manint:v:57:y:2017:i:3:d:10.1007_s11575-016-0290-y is not listed on IDEAS
    4. Song, Sangcheol, 2014. "Unfavorable Market Conditions, Institutional and Financial Development, and Exits of Foreign Subsidiaries," Journal of International Management, Elsevier, vol. 20(3), pages 279-289.
    5. Marcus Dittfeld, 2017. "Multinationality and Performance: A Context-Specific Analysis for German Firms," Management International Review, Springer, vol. 57(1), pages 1-35, February.
    6. Aabo, Tom & Pantzalis, Christos & Park, Jung Chul, 2016. "Multinationality as real option facilitator — Illusion or reality?," Journal of Corporate Finance, Elsevier, vol. 38(C), pages 1-17.
    7. Gleich, Wolfgang & Schmeisser, Bjoern & Zschoche, Miriam, 2017. "The influence of competition on international sourcing strategies in the service sector," International Business Review, Elsevier, vol. 26(2), pages 279-287.
    8. Mauri, Alfredo J. & Neiva de Figueiredo, João, 2012. "Strategic Patterns of Internationalization and Performance Variability: Effects of US-Based MNC Cross-Border Dispersion, Integration, and Outsourcing," Journal of International Management, Elsevier, vol. 18(1), pages 38-51.
    9. Geleilate, José-Mauricio G. & Magnusson, Peter & Parente, Ronaldo C. & Alvarado-Vargas, Marcelo J., 2016. "Home Country Institutional Effects on the Multinationality–Performance Relationship: A Comparison Between Emerging and Developed Market Multinationals," Journal of International Management, Elsevier, vol. 22(4), pages 380-402.
    10. repec:spr:manint:v:57:y:2017:i:4:d:10.1007_s11575-017-0317-z is not listed on IDEAS
    11. Song, Sangcheol & Lee, Seung-Hyun & Makhija, Mona, 2015. "Operational hedging in foreign direct investments under volatile and divergent exchange rates across countries," Journal of World Business, Elsevier, vol. 50(3), pages 548-557.
    12. Song, Sangcheol, 2015. "Exchange rate challenges, flexible intra-firm adjustments, and subsidiary longevity," Journal of World Business, Elsevier, vol. 50(1), pages 36-45.
    13. Sangcheol Song, 2017. "Ownership Increase in International Joint Ventures: The Within- and Across-Country Flexibility Perspective," Management International Review, Springer, vol. 57(1), pages 93-120, February.
    14. repec:spr:manint:v:53:y:2013:i:6:d:10.1007_s11575-013-0181-4 is not listed on IDEAS

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