Subsidiary expansion/contraction during times of economic crisis

Abstract

This paper compares two real options - within-country growth and across-country operational flexibility - to examine subsidiary expansion/contraction during times of economic crisis. Specifically, we examine how the real options orientations of individual subsidiaries interact with the general characteristics of multinational enterprise networks. Our main findings are that: (a) economic crises can be detrimental for subsidiaries with stronger within-country orientations, and advantageous for those with stronger across-country orientations; and (b) network characteristics are not the sole determinants of subsidiary expansion/contraction - what really matters is how the real options orientations of individual subsidiaries mesh with the overall characteristics of the network they belong to. Journal of International Business Studies (2010) 41, 500-516. doi:10.1057/jibs.2009.72