Flexibility in internationalization: is it valuable during an economic crisis?
Article first published online: 13 JAN 2009
Copyright © 2009 John Wiley & Sons, Ltd.
Strategic Management Journal
Volume 30, Issue 5, pages 537–555, May 2009
How to Cite
Lee, S.-H. and Makhija, M. (2009), Flexibility in internationalization: is it valuable during an economic crisis?. Strat. Mgmt. J., 30: 537–555. doi: 10.1002/smj.742
- Issue published online: 4 MAR 2009
- Article first published online: 13 JAN 2009
- Manuscript Revised: 20 OCT 2008
- Manuscript Received: 18 JUL 2006
- Graduate School of The Ohio State University
- real options;
- economic crisis;
- foreign direct investment;
This study investigates the value of the strategic flexibility provided by firms' international investments during an economic crisis, defined here as an unanticipated significant downturn in the economy. To avoid below-par performance, firms need to adapt quickly to this significant change in their environment, making real options very valuable to them. Although firms' international investments can potentially provide such flexibility, this issue has not been empirically examined in a context of such dramatic negative change. We consider two types of international investments by firms in this regard, foreign direct investments and export-related international investments, developing two measures that directly assess the flexibility derived from each that are new to the literature. Based on these measures, we find evidence that both types of international investments provided valuable flexibility for Korean firms during the economic crisis conditions. This study contributes to the literature by showing that firms with real options investments in place have a greater ability to flexibly adapt their overall operations in line with unforeseen negative environmental change, in contrast to firms without such investments. Copyright © 2009 John Wiley & Sons, Ltd.