Strategic Seminar（2014-10）

Topic：Switching Options and Foreign Entry Decisions: The Role of Portfolio Configuration

Speaker:Shubin Wu(Shanghai University of Finance and Economics)

Time: Tuesday,30 December, 12:45-14:00 pm

Location: Room K02,Guanghua Building 2

Abstract:

Research on foreign market entry has rarely considered that multinational firms’ new entry decisions may be affected by the configuration of their existing portfolio of affiliates. We argue that in making entry decisions, firms take into account the contribution that an entry into a new location makes towards increasing the operational flexibility of their manufacturing affiliate portfolios. Such increase in operational flexibility derives from the enhanced options to switch operation across internationally dispersed affiliates in case of diverging labor cost developments. Analysis of the foreign entry decisions of the population of publicly-listed Japanese manufacturing multinationals strongly supports this notion and also establishes some boundary conditions to the effect of operational flexibility on entry. We discuss our study’s implications for research on entry and real options. (125 words)

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