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Actualization of growth potential in international joint ventures: The moderating effects of localization strategies

Sangcheol Song

Journal of World Business, 2020, vol. 55, issue 2

Abstract: We employ the growth options perspective to examine how multinational corporations’ localization strategies facilitate the actualization of growth potential preserved in international joint ventures (IJVs). This study uses a data of Korean IJVs; it accounts for the endogeneity associated with a firm’s decision to exercise growth options through a two-stage model. We find that the enlarged IJVs, via conversion to majority ownership under reduced host market demand uncertainty, performed better. We also find that the realized growth potential are larger for IJVs that have more local business ties with other firms, or that hire more local employees. This study contributes to the growth options literature by examining the strategies that enable firms to exploit evolved exogenous uncertainty, and thus actualize upside growth potential.

Keywords: Multinational corporations; Growth options; International joint ventures; Host market uncertainty; Performance (search for similar items in EconPapers)
Date: 2020
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DOI: 10.1016/j.jwb.2019.101024

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