Real options in multinational decision-making: Managerial awareness and risk implications

Driouchi, Tarik; Bennett, David
April 2011
Journal of World Business;Apr2011, Vol. 46 Issue 2, p205
Academic Journal
Abstract: This paper addresses the theme of real options decision-making in multinational corporations (MNCs) and stresses the role of real options attention and managerial learning in company performance. Using a sample of 278 large MNCs with categorised degrees of managerial real options awareness, we examine the risk implications of switching options in multinational operations, and explore the extent to which the real options logic can be classified as �best practice� in decision-making and risk management. Our results reveal that MNCs which have high managerial awareness about their real options are able to reduce their downside risk through multinationality, organisational slack and other firm characteristics. This finding does not apply fully to MNCs without evidence of such an awareness. Also, although real options awareness does not systematically guarantee lower downside risk from operations, supplementary results indicate that MNCs with evidence of significant investment in the acquisition of real options knowledge tend to outperform competitors that are unaware of their real options. This suggests that if real options are explored and exploited appropriately, real options decision-making can result into superior performance for MNCs in the long-term.


Related Articles

  • Entrepreneurial contexts and knowledge coordination within the multinational corporation. Williams, Christopher; Lee, Soo Hee // Journal of World Business;Apr2011, Vol. 46 Issue 2, p253 

    Abstract: We present a new perspective on entrepreneurship within multinational corporations (MNCs) based on entrepreneurial contexts and knowledge coordination. First, we develop a framework of four contexts for analyzing different mechanisms by which MNCs pursue opportunities across borders....

  • Managerial ties, knowledge acquisition, realized absorptive capacity and new product market performance of emerging multinational companies: A case of China. Kotabe, Masaaki; Jiang, Crystal Xiangwen; Murray, Janet Y. // Journal of World Business;Apr2011, Vol. 46 Issue 2, p166 

    Abstract: Many firms rely on external sources to acquire knowledge that is critical for enhancing new product market performance. Using a sample of 121 emerging multinational corporations (EMNCs) from China, we explore the effects of managerial ties with government officials and foreign MNC...

  • HOW TO USE REAL OPTION PERSPECTIVE ON COMMUNITIES OF PRACTICE. Wang, Tz-Li; Lien, Ya-Hui Bella // International Journal of Business Research;2011, Vol. 11 Issue 3, p176 

    A consensus amongst researchers clearly points to CoPs as being beneficial to knowledge acquisition and sharing, and the impetus to organizational transformation. However, CoPs are still uncommon in organizations or deemphasized. One of reasons is managers lack the knowledge or necessary skill...

  • An entry/exit decision for transnational production system: applying optimal financing behavior. Lin, Tyrone; Ou, Yu-hsin // Quality & Quantity;Oct2011, Vol. 45 Issue 6, p1349 

    This study introduces the real options approach to construct the decision model of entry (exit) in flexible transnational production systems. The firm value is appraised under the external financing behavior to solve the optimal cross-border financing ratios by transnational production systems....

  • DECISION SCIENCE MODELS FOR THE MULTINATIONAL FIRM: A GUIDED TOUR FOR MANAGEMENT. Hindelang, Thomas J. // Academy of Management Proceedings (00650668);1975, p303 

    The rapid growth and increasing significance of multinational corporations has hastened the need for powerful decision-making models to assist firms in evaluating global opportunities within a framework of increased risks and complexities. The international setting necessitates the analysis of...

  • Commentary: Knowing and knowing about. Peile, Ed // BMJ: British Medical Journal (International Edition);3/18/2006, Vol. 332 Issue 7542, p645 

    The article presents a discussion of levels of knowledge on which doctors can rely. It uses G. E. Miller's pyramid of competence. It explains that according to this standard, superior competence is achieved when the doctor can use knowledge in a particular setting. The next upward level shows...

  • Impact of Knowledge Management Practices on Organizational Performance: an Empirical study of Banking Sector in Pakistan. Ahmed, Shakeel; Fiaz, Mohammad; Shoaib, Mohammad // FWU Journal of Social Sciences;Winter2015, Vol. 9 Issue 2, p147 

    The purpose of this study was to identify the impact of knowledge management practices e.g. Knowledge acquisition, knowledge conversion, knowledge application and knowledge protection on organizational performance. For this purpose survey methodology questionnaire was used to get response from...

  • Capital Budgeting and the Multinational Corporation. Stonehill, Arthur; Nathanson, Leonard // California Management Review;Summer68, Vol. 10 Issue 4, p39 

    A survey of the methods currently being used by firms to evaluate multinational financing investments indicates that a better conceptual framework for such evaluation is needed. Solutions to capital budgeting problems are suggested.

  • Organizing the Web's Information Explosion to Discover Unknown Unknowns. Torisawa, Kentaro; De Saeger, Stijn; Kazama, Jun’ichi; Sumida, Asuka; Noguchi, Daisuke; Kakizawa, Yasunori; Murata, Masaki; Kuroda, Kow; Yamada, Ichiro // New Generation Computing;Jul2010, Vol. 28 Issue 3, p217 

    This paper introduces the TORISHIKI-KAI project, which aims to construct a million-word-scale semantic network from the Web using state of the art knowledge acquisition methods. The resulting network can be browsed as a Web search directory, and we show that the directory is useful for finding...


Read the Article


Sorry, but this item is not currently available from your library.

Try another library?
Sign out of this library

Other Topics