Multinational Real Options and Hysteresis: An Examination of FDI in Manufacturing and Hard-and Soft-Service Industries
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.
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.