Managerial Flexibility Implications of Globalization Strategies

Abstract

This research is a first attempt to provide empirical evidence with a unique panel database on the strategic value implications of corporate globalization of the largest multinational enterprises (MNEs) in terms of R&D expenditures. In the extant multinationality-performance research, only financial performance indicators are used. The value of active management under high uncertainty is therefore ignored. In the process of business global expansion as well as R&D investment, high market uncertainty is precisely the reality that MNEs face. Our research builds on the real options perspective to investigate the managerial flexibility implications of home-region orientation of top R&D spending MNEs. The current research has three main findings. First, host-regional MNEs have higher upside potential and downside risk than home-regional MNEs. Second, MNEs can exploit innovation FSA in the home-region more efficiently, compared to non-home regions. Finally, we also found that the corporate globalization strategies of companies contribute to the company’s managerial flexibility, to certain extent, due to the specificities of company’s regional culture, institution and economic development, as well as the industrial structure of the company’s industry.