IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this article or follow this journal

Real options in multinational corporations: organizational challenges and risk implications

  • Tony W Tong

    (School of Management, State University of New York at Buffalo, Buffalo, NY, USA)

  • Jeffrey J Reuer

    (Kenan-Flagler Business School, University of North Carolina, Chapel Hill, NC, USA)

Registered author(s):

    In this study, we investigate how multinationality affects firms’ risk levels. Our investigation builds on the idea from real options theory that international operations offer switching options to multinational corporations, yet we also emphasize different sources of coordination costs that can mitigate the benefits of operational flexibility. The findings from Tobit models accounting for self-selection underscore the importance of unobserved heterogeneity in the relationships between international investments and risk levels. Consistent with the coordination costs surrounding international operations, we find that the relationship between multinationality and downside risk is curvilinear: risk first declines and then increases as a firm's portfolio of international investments becomes extensive. In addition, downside risk is an increasing function of the average cultural distance between a firm's home base and the host countries in which its foreign subsidiaries operate. Journal of International Business Studies (2007) 38, 215–230. doi:10.1057/palgrave.jibs.8400260

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

    File URL: http://www.palgrave-journals.com/jibs/journal/v38/n2/pdf/8400260a.pdf
    File Function: Link to full text PDF
    Download Restriction: Access to full text is restricted to subscribers.

    File URL: http://www.palgrave-journals.com/jibs/journal/v38/n2/full/8400260a.html
    File Function: Link to full text HTML
    Download Restriction: Access to full text is restricted to subscribers.

    As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

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

    Volume (Year): 38 (2007)
    Issue (Month): 2 (March)
    Pages: 215-230

    as
    in new window

    Handle: RePEc:pal:jintbs:v:38:y:2007:i:2:p:215-230
    Contact details of provider: Web page: http://www.palgrave-journals.com/

    Order Information: Postal: Palgrave Macmillan Journals, Subscription Department, Houndmills, Basingstoke, Hampshire RG21 6XS, UK
    Web: http://www.palgrave-journals.com/pal/subscribe/index.html Email:


    No references listed on IDEAS
    You can help add them by filling out this form.

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    When requesting a correction, please mention this item's handle: RePEc:pal:jintbs:v:38:y:2007:i:2:p:215-230. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Daniel Foley)

    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 references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link 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 profile, as there may be some citations waiting for confirmation.

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

    This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.