IDEAS home Printed from https://ideas.repec.org/a/gam/jjrfmx/v18y2025i3p144-d1608968.html
   My bibliography  Save this article

Exploring Parallel Compound Real Options in MNCs International Transactions

Author

Listed:
  • Andrejs Čirjevskis

    (Faculty of Business and Economics, RISEBA University of Applied Sciences, Meza Street 3, LV-1048 Riga, Latvia)

Abstract

This paper investigates the valuation of international acquisitions of multinational corporations (MNCs) using real options theory, focusing on L’Oréal’s acquisition of Aesop. It explores how MNCs create growth and deferral options simultaneously in M&A deals, enhancing market value and promoting sustainable practices. The study addresses two key questions: the role of MNCs in advancing sustainability and the measurement of market value added through parallel compound options. Using L’Oréal’s acquisition of Aesop as a case study, the paper demonstrates the strategic benefits of combining growth and deferral options. Examples include L’Oréal’s expansion into new markets like China, leveraging Aesop’s sustainable practices, and achieving competence-based collaborative synergies. The findings provide a framework for assessing collaborative synergies in international transactions, contributing to the literature on strategic management, international business, and financial management. In conclusion, the paper highlights the importance of strategic flexibility and sustainability in MNC acquisitions, offering valuable insights for future research and practical applications in international business.

Suggested Citation

  • Andrejs Čirjevskis, 2025. "Exploring Parallel Compound Real Options in MNCs International Transactions," JRFM, MDPI, vol. 18(3), pages 1-21, March.
    • Handle: RePEc:gam:jjrfmx:v:18:y:2025:i:3:p:144-:d:1608968
    as

    Download full text from publisher

    File URL: https://www.mdpi.com/1911-8074/18/3/144/pdf
    Download Restriction: no
    File URL: https://www.mdpi.com/1911-8074/18/3/144/
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Han T.J. Smit & Lenos Trigeorgis, 2010. "Flexibility and Games in Strategic Investment," Multinational Finance Journal, Multinational Finance Journal, vol. 14(1-2), pages 125-151, March-Jun.
    2. Daitian Li & Tony W Tong & Yangao Xiao & Feida Zhang, 2022. "Terrorism-induced uncertainty and firm R&D investment: A real options view," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 53(2), pages 255-267, March.
    3. Chris Changwha Chung & Seung-Hyun Lee & Jeoung-Yul Lee, 2013. "Dual-Option Subsidiaries and Exit Decisions During Times of Economic Crisis," Management International Review, Springer, vol. 53(4), pages 555-577, August.
    4. Helfat, C.E. & Raubitschek, R.S., 2000. "Product Sequencing: Co-Evolution of Knowledge, Capabilities and Products," Papers 00-1, U.S. Department of Justice - Antitrust Division.
    5. Timothy B. Folta & Jonathan P. O'Brien, 2004. "Entry in the presence of dueling options," Strategic Management Journal, Wiley Blackwell, vol. 25(2), pages 121-138, February.
    6. 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.
    7. Constance E. Helfat & Ruth S. Raubitschek, 2000. "Product sequencing: co‐evolution of knowledge, capabilities and products," Strategic Management Journal, Wiley Blackwell, vol. 21(10‐11), pages 961-979, October.
    8. López Prol, Javier & Kim, Kiwoong, 2022. "Risk-return performance of optimized ESG equity portfolios in the NYSE," Finance Research Letters, Elsevier, vol. 50(C).
    9. Myers, Stewart C., 1977. "Determinants of corporate borrowing," Journal of Financial Economics, Elsevier, vol. 5(2), pages 147-175, November.
    10. Rodolphe Durand & Robert M. Grant & Tammy L. Madsen & Lenos Trigeorgis & Jeffrey J. Reuer, 2017. "Real options theory in strategic management," Strategic Management Journal, Wiley Blackwell, vol. 38(1), pages 42-63, January.
    11. Jesper Edman & Ilya R. P. Cuypers & Gokhan Ertug & Ruth V. Aguilera, 2024. "Nationalist sentiments and the multinational enterprise: insights from organizational sociology," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 55(7), pages 825-839, September.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Andrejs Čirjevskis, 2022. "Measuring Collaborative Synergies with Advanced Real Options: MNEs’ Sequential Acquisitions of International Ventures," JRFM, MDPI, vol. 16(1), pages 1-18, December.
    2. Song, Sangcheol, 2021. "When do multinational corporations adjust production volume flexibly among in-network subsidiaries?," Journal of Business Research, Elsevier, vol. 135(C), pages 532-542.
    3. Andrés, Pablo de & Fuente, Gabriel de la & Velasco, Pilar, 2021. "Exercising a firm’s growth options: A portfolio approach," Journal of Business Research, Elsevier, vol. 132(C), pages 571-585.
    4. Tailan Chi & Jing Li & Lenos G Trigeorgis & Andrianos E Tsekrekos, 2019. "Real options theory in international business," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 50(4), pages 525-553, June.
    5. Sharon Belenzon & Victor Manuel Bennett & Andrea Patacconi, 2019. "Flexible Production and Entry: Institutional, Technological, and Organizational Determinants," NBER Working Papers 25659, National Bureau of Economic Research, Inc.
    6. María José Ruiz-Ortega & Gloria Parra-Requena & Pedro Manuel García-Villaverde, 2016. "Do Territorial Agglomerations Still Provide Competitive Advantages? A Study of Social Capital, Innovation, and Knowledge," International Regional Science Review, , vol. 39(3), pages 259-290, July.
    7. Sharon Belenzon & Victor Manuel Bennett & Andrea Patacconi, 2019. "Flexible Production and Entry: Institutional, Technological, and Organizational Determinants," Strategy Science, INFORMS, vol. 4(3), pages 193-216, September.
    8. Reid, Gavin C. & Smith, Julia A., 2009. "A coevolutionary analysis of organisational systems and processes: Quantitative applications to information system dynamics in small entrepreneurial firms," CRITICAL PERSPECTIVES ON ACCOUNTING, Elsevier, vol. 20(6), pages 762-781.
    9. Schriber, Svante & Löwstedt, Jan, 2015. "Tangible resources and the development of organizational capabilities," Scandinavian Journal of Management, Elsevier, vol. 31(1), pages 54-68.
    10. Carmen Schiel & Simon Glöser-Chahoud & Frank Schultmann, 2019. "A real option application for emission control measures," Journal of Business Economics, Springer, vol. 89(3), pages 291-325, April.
    11. Choi, Jongmoo Jay & Ju, Ming & Trigeorgis, Lenos & Zhang, Xiaotian Tina, 2021. "Outsourcing flexibility under financial constraints," Journal of Corporate Finance, Elsevier, vol. 67(C).
    12. Hart E. Posen & Michael J. Leiblein & John S. Chen, 2018. "Toward a behavioral theory of real options: Noisy signals, bias, and learning," Strategic Management Journal, Wiley Blackwell, vol. 39(4), pages 1112-1138, April.
    13. Sears, Joshua B., 2019. "A real options model of market entry: Endogenous uncertainty and exogenous uncertainty," Journal of International Management, Elsevier, vol. 25(3), pages 1-1.
    14. Shen, Huayu & Hou, Fei, 2021. "Trade policy uncertainty and corporate innovation evidence from Chinese listed firms in new energy vehicle industry," Energy Economics, Elsevier, vol. 97(C).
    15. Nathan R. Furr, 2019. "Product Adaptation During New Industry Emergence: The Role of Start-Up Team Preentry Experience," Organization Science, INFORMS, vol. 30(5), pages 1076-1096, September.
    16. K Shiljas & Dilip Kumar, 2024. "The interplay of cash flow uncertainty and firm life cycle on sustainability disclosure," Business Strategy and the Environment, Wiley Blackwell, vol. 33(8), pages 8471-8492, December.
    17. Ding, Yang, 2021. "Antecedents and implications of legacy divestitures," Other publications TiSEM f4d5766f-6a5b-43a3-94df-1, Tilburg University, School of Economics and Management.
    18. Mahka Moeen & Rajshree Agarwal & Sonali K. Shah, 2020. "Building Industries by Building Knowledge: Uncertainty Reduction over Industry Milestones," Strategy Science, INFORMS, vol. 5(3), pages 218-244, September.
    19. Chuan-Chuan Ko & Chien-Yu Liu & Zan-Yu Chen & Jing Zhou, 2019. "Sustainable Development Economic Strategy Model for Reducing Carbon Emission by Using Real Options Approach," Sustainability, MDPI, vol. 11(19), pages 1-14, October.
    20. Sousa, Carlos M.P. & He, Xinming & Lengler, Jorge & Tang, Linhan, 2021. "Foreign market re-entry: A review and future research directions," Journal of International Management, Elsevier, vol. 27(2).

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:gam:jjrfmx:v:18:y:2025:i:3:p:144-:d:1608968. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: MDPI Indexing Manager (email available below). General contact details of provider: https://www.mdpi.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.