A Bridge between Polar Views of Operating Flexibility and Location-Specific Commitment
Whether and how international diversification and cross-border arbitrage affects firm performance remains one of the major unresolved research questions in the strategy and international business literatures. We propose that knowing how much a firm has internationally diversified tells us very little about performance implications, if we do not know, and do not ask, how the firm has diversified. Therefore, building on the two broad arguments of operating flexibility and location-specific commitment, we develop a theoretical framework that focuses on the extent to which a firm's international arbitrage strategy is characterized by specialization versus replication and argue that these different strategies may have differential impact on profitability and risk reduction. Developing a sophisticated measure of international specialization and using a unique panel data set of 92 German MNEs to test our hypotheses, we provide a novel perspective on the relationship between international arbitrage and firm performance.
Academy of International Business. Annual Meeting. Proceedings, 2012, p. 43-44
Main Research Area:
Academy of International Business. Annual Meeting. Proceedings