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Learning from Risky Environments: Global Diversification Strategies of Spanish MNEs

Author

Listed:
  • Alfredo Jiménez

    (University of Burgos)

  • Diana Benito-Osorio

    (Rey Juan Carlos University)

  • Carmen Palmero-Cámara

    (University of Burgos)

Abstract

This paper seeks to investigate the bilateral impact of two components of global diversification: political risk and product diversification relatedness. By analyzing a sample of 119 Spanish firms we find empirical evidence that having experience in risky environments is a useful resource for multinational enterprises. The results obtained show that experience managing high levels of political risk in the foreign direct investment (FDI) portfolio increases the number of countries where the firm may potentially invest. This multinational flexibility encourages a higher degree of product diversification relatedness by facilitating the achievement of economies of scope in the activities carried out in foreign markets. By contrast, the degree of relatedness in product diversification did not show any significant impact on political risk, due to the existence of instruments available to cover or minimize this risk when investing abroad.

Suggested Citation

  • Alfredo Jiménez & Diana Benito-Osorio & Carmen Palmero-Cámara, 2015. "Learning from Risky Environments: Global Diversification Strategies of Spanish MNEs," Management International Review, Springer, vol. 55(4), pages 485-509, August.
    • Handle: RePEc:spr:manint:v:55:y:2015:i:4:d:10.1007_s11575-014-0232-5
    DOI: 10.1007/s11575-014-0232-5
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