EconPapers    
Economics at your fingertips  
 

Multinationality, portfolio diversification, and asymmetric MNE performance: The moderating role of real options awareness

Sophocles P. Ioulianou (), Michael J. Leiblein () and Lenos Trigeorgis ()
Additional contact information
Sophocles P. Ioulianou: School of Economics and Management, University of Cyprus
Michael J. Leiblein: The Ohio State University
Lenos Trigeorgis: School of Economics and Management, University of Cyprus

Journal of International Business Studies, 2021, vol. 52, issue 3, No 3, 388-408

Abstract: Abstract The field of international business is fundamentally concerned with the implications of managerial actions that affect multinational risk and performance outcomes. While portfolio diversification and real options theory are often used to describe the outcomes of multinational investment, existing work often confuses the actions and predictions proposed by these theories. This is concerning, as the two theories emphasize different causal mechanisms, managerial actions, and conceptions of risk and performance. Whereas portfolio theory argues that passive management affects symmetric outcomes, such as variance in returns by attaining a well-diversified portfolio, real options theory posits that managers actively shift subsidiary resources to affect asymmetric outcomes, such as upside potential or downside risk by monitoring and responding to environmental changes affecting the portfolio. This paper disentangles these two theories by focusing on unique predictions from real options theory – that geographic dispersion of MNE activities is associated with asymmetric outcomes, that this association is contingent on management being aware of real options logic, and that these effects are moderated by the degree of market uncertainty. Our findings confirm these predictions and suggest differences in the types of managerial strategies and actions required to effectively implement these distinct theories of the MNE.

Keywords: real options logic; multinational corporations (MNCs) and enterprises (MNEs); multinational networks; downside risk; decision-making under uncertainty (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
http://link.springer.com/10.1057/s41267-020-00357-3 Abstract (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:pal:jintbs:v:52:y:2021:i:3:d:10.1057_s41267-020-00357-3

Ordering information: This journal article can be ordered from
http://www.springer. ... nt/journal/41267/PS2

DOI: 10.1057/s41267-020-00357-3

Access Statistics for this article

Journal of International Business Studies is currently edited by John Cantwell

More articles in Journal of International Business Studies from Palgrave Macmillan, Academy of International Business
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().

 
Page updated 2021-08-21
Handle: RePEc:pal:jintbs:v:52:y:2021:i:3:d:10.1057_s41267-020-00357-3