Multinational Real Options and Hysteresis: An Examination of FDI in Manufacturing and Hard-and Soft-Service Industries
Document Type
Article
Publication Date
1-1-2012
Journal / Book Title
Emerging Markets Finance and Trade
Abstract
Growth option benefits in foreign direct investment may be limited by a low probability of exercise due to less demand or corporate focus change. Acquisitions driven by management self-interest may even decrease shareholder wealth. Flexibility option benefits are negligible among soft-service multinational enterprises (MNEs), but are better realized by hard-service MNEs, which are operationally less encumbered by hysteresis than manufacturing MNEs. For 235 foreign acquisitions announced by U.S. firms during 1999 and 2000, flexibility options have a positive effect on shareholder value especially for the hard-service acquirers, which are less subject to the muting effects of hysteresis.
DOI
10.2753/REE1540-496X4801S101
MSU Digital Commons Citation
Baek, H. Young; Cho, David; and Kim, Dong-Kyoon, "Multinational Real Options and Hysteresis: An Examination of FDI in Manufacturing and Hard-and Soft-Service Industries" (2012). Department of Accounting and Finance Faculty Scholarship and Creative Works. 86.
https://digitalcommons.montclair.edu/acctg-finance-facpubs/86
Published Citation
Baek, H. Y., Cho, D., & Kim, D. K. (2012). Multinational Real Options and Hysteresis: An Examination of FDI in Manufacturing and Hard- and Soft-Service Industries. Emerging Markets Finance and Trade, 48(sup1), 7–19. https://doi.org/10.2753/REE1540-496X4801S101
