Pitting real options theory against risk diversification theory: International diversification and joint ownership control in economic crisis

Chris Changwha Chung*, Seung Hyun Lee, Paul W. Beamish, Colette Southam, Daeil Dale Nam

*Corresponding author for this work

Research output: Contribution to journalArticleResearchpeer-review

38 Citations (Scopus)

Abstract

This study examines how MNE divestment decisions differ according to real options vs. risk diversification perspectives. We develop competing hypotheses in relation to international diversification and joint ownership control. Empirical results give consistent support to the real options perspective. We find that large MNEs with greater international diversification are less likely to divest their subsidiaries during times of economic crisis. The negative effect of joint ownership control is however manifested in both crisis-stricken and non-crisis country subsidiaries as well as in their interaction effect.

Original languageEnglish
Pages (from-to)122-136
Number of pages15
JournalJournal of World Business
Volume48
Issue number1
DOIs
Publication statusPublished - Jan 2013

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