The Risk Implications of Multinational Enterprise

    Research output: Contribution to journalJournal articleResearchpeer-review

    Abstract

    Purpose – Multinational structure has been linked to operational flexibilities that can improve corporate adaptability and a knowledge-based view suggests that multinational resource diversity can facilitate responsive opportunities. The enhanced maneuverability from this can reduce earnings volatility and hence the corporate performance risk. But, the internationalization process may also require irreversible investments that increase corporate exposures and leave the risk implications of multinational enterprize somewhat ambiguous. Hence, the purpose of the paper is to present an empirical study of the implied relationships between the degree of multinationality and various risk measures including downside risk, upside potential, and performance risk.

    Design/methodology/approach – The paper provides a brief literature review, develops hypotheses, and tests them in two-stage least square regressions on archival data to control for pre-selection biases.

    Findings – The analyses indicate that multinationality is associated with lower downside risk as well as higher upside potential and leads to reduced performance risk. The study finds no trace of diminishing effects from higher degrees of multinationality.

    Research limitations/implications – The empirical study uses a sample of large US-based corporations, which could affect the generalizability of results. However, this is consistent with other studies and eases comparability of findings.

    Practical implications – The findings add to the ongoing debate about the risk effects of a multinational corporate structure and confirms that a diverse multinational presence is associated with positive risk outcomes.

    Originality/value – The paper complements a limited number of studies with equivocal results and adopts alternative risk outcome measures. The study extends the industry scope by introducing a comprehensive sample of firms operating in different manufacturing and service businesses.
    Original languageEnglish
    JournalInternational Journal of Organizational Analysis
    Volume19
    Issue number1
    Pages (from-to)49-70
    ISSN1934-8835
    DOIs
    Publication statusPublished - 2011

    Keywords

    • International Organizations
    • Multinational Companies
    • Risk Management

    Cite this

    @article{5d1dce0168064033a2c402b3ed883d4b,
    title = "The Risk Implications of Multinational Enterprise",
    abstract = "Purpose – Multinational structure has been linked to operational flexibilities that can improve corporate adaptability and a knowledge-based view suggests that multinational resource diversity can facilitate responsive opportunities. The enhanced maneuverability from this can reduce earnings volatility and hence the corporate performance risk. But, the internationalization process may also require irreversible investments that increase corporate exposures and leave the risk implications of multinational enterprize somewhat ambiguous. Hence, the purpose of the paper is to present an empirical study of the implied relationships between the degree of multinationality and various risk measures including downside risk, upside potential, and performance risk.Design/methodology/approach – The paper provides a brief literature review, develops hypotheses, and tests them in two-stage least square regressions on archival data to control for pre-selection biases.Findings – The analyses indicate that multinationality is associated with lower downside risk as well as higher upside potential and leads to reduced performance risk. The study finds no trace of diminishing effects from higher degrees of multinationality.Research limitations/implications – The empirical study uses a sample of large US-based corporations, which could affect the generalizability of results. However, this is consistent with other studies and eases comparability of findings.Practical implications – The findings add to the ongoing debate about the risk effects of a multinational corporate structure and confirms that a diverse multinational presence is associated with positive risk outcomes.Originality/value – The paper complements a limited number of studies with equivocal results and adopts alternative risk outcome measures. The study extends the industry scope by introducing a comprehensive sample of firms operating in different manufacturing and service businesses.",
    keywords = "International Organizations, Multinational Companies, Risk Management",
    author = "Andersen, {Torben Juul}",
    year = "2011",
    doi = "10.1108/19348831111121303",
    language = "English",
    volume = "19",
    pages = "49--70",
    journal = "International Journal of Organizational Analysis",
    issn = "1934-8835",
    publisher = "JAI Press",
    number = "1",

    }

    The Risk Implications of Multinational Enterprise. / Andersen, Torben Juul.

    In: International Journal of Organizational Analysis, Vol. 19, No. 1, 2011, p. 49-70.

    Research output: Contribution to journalJournal articleResearchpeer-review

    TY - JOUR

    T1 - The Risk Implications of Multinational Enterprise

    AU - Andersen, Torben Juul

    PY - 2011

    Y1 - 2011

    N2 - Purpose – Multinational structure has been linked to operational flexibilities that can improve corporate adaptability and a knowledge-based view suggests that multinational resource diversity can facilitate responsive opportunities. The enhanced maneuverability from this can reduce earnings volatility and hence the corporate performance risk. But, the internationalization process may also require irreversible investments that increase corporate exposures and leave the risk implications of multinational enterprize somewhat ambiguous. Hence, the purpose of the paper is to present an empirical study of the implied relationships between the degree of multinationality and various risk measures including downside risk, upside potential, and performance risk.Design/methodology/approach – The paper provides a brief literature review, develops hypotheses, and tests them in two-stage least square regressions on archival data to control for pre-selection biases.Findings – The analyses indicate that multinationality is associated with lower downside risk as well as higher upside potential and leads to reduced performance risk. The study finds no trace of diminishing effects from higher degrees of multinationality.Research limitations/implications – The empirical study uses a sample of large US-based corporations, which could affect the generalizability of results. However, this is consistent with other studies and eases comparability of findings.Practical implications – The findings add to the ongoing debate about the risk effects of a multinational corporate structure and confirms that a diverse multinational presence is associated with positive risk outcomes.Originality/value – The paper complements a limited number of studies with equivocal results and adopts alternative risk outcome measures. The study extends the industry scope by introducing a comprehensive sample of firms operating in different manufacturing and service businesses.

    AB - Purpose – Multinational structure has been linked to operational flexibilities that can improve corporate adaptability and a knowledge-based view suggests that multinational resource diversity can facilitate responsive opportunities. The enhanced maneuverability from this can reduce earnings volatility and hence the corporate performance risk. But, the internationalization process may also require irreversible investments that increase corporate exposures and leave the risk implications of multinational enterprize somewhat ambiguous. Hence, the purpose of the paper is to present an empirical study of the implied relationships between the degree of multinationality and various risk measures including downside risk, upside potential, and performance risk.Design/methodology/approach – The paper provides a brief literature review, develops hypotheses, and tests them in two-stage least square regressions on archival data to control for pre-selection biases.Findings – The analyses indicate that multinationality is associated with lower downside risk as well as higher upside potential and leads to reduced performance risk. The study finds no trace of diminishing effects from higher degrees of multinationality.Research limitations/implications – The empirical study uses a sample of large US-based corporations, which could affect the generalizability of results. However, this is consistent with other studies and eases comparability of findings.Practical implications – The findings add to the ongoing debate about the risk effects of a multinational corporate structure and confirms that a diverse multinational presence is associated with positive risk outcomes.Originality/value – The paper complements a limited number of studies with equivocal results and adopts alternative risk outcome measures. The study extends the industry scope by introducing a comprehensive sample of firms operating in different manufacturing and service businesses.

    KW - International Organizations

    KW - Multinational Companies

    KW - Risk Management

    U2 - 10.1108/19348831111121303

    DO - 10.1108/19348831111121303

    M3 - Journal article

    VL - 19

    SP - 49

    EP - 70

    JO - International Journal of Organizational Analysis

    JF - International Journal of Organizational Analysis

    SN - 1934-8835

    IS - 1

    ER -