Foreign Operation Mode Flexibility: Tradeoffs and Managerial Responses

Bent Petersen*, Gabriel R. G. Benito, Lawrence S. Welch

*Corresponding author for this work

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Firms’ ability to change foreign operation modes appears highly desirable in an increasingly volatile and unpredictable global environment. We propose and discuss mode flexibility as a management capability, with the aim at curbing the potential downsides of flexibility; in particular, the extra costs of coordination and contracting as well as revenue losses due to diminished partner commitment. We model the balancing and shifting of essential tradeoffs in relation to the two dimensions of mode flexibility – multiplicity and switchability – and highlight modularization and reciprocal use of real options as examples of tradeoff-shifting mechanisms that may improve the cost-benefit balance of mode flexibility.
Original languageEnglish
JournalInternational Journal of the Economics of Business
Issue number2
Pages (from-to)281-307
Number of pages27
Publication statusPublished - May 2021

Bibliographical note

Published online: 10 March 2021.


  • Foreign operation mode
  • Flexibility
  • Tradeoffs
  • Real options

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