Going International and Afterwards




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This dissertation includes three essays that cover various aspects of doing business abroad, namely internationalization, international risk-taking, and international risk management. In the first essay we mainly focus on firm internationalization. The study starts by questioning the different behavioral as well as performance implications of perceived and objective competition. We conjecture that firms respond to competition based on how intense they perceive it to be, which determines their behavior and ultimately performance. However, firms cannot always accurately assess the intensity of objective competition. Such misperception (i.e., competition gap) will likely determine the effectiveness of firm behavior in responding to perceived competition. Based on a survey dataset covering 26 transition economies, we find empirical results that corroborate our idea. Specifically, we show a mediated relationship where perceived competition push firms to pursue outside opportunities (i.e., internationalize), which leads to better performance. Moreover, we find that competition gap positively moderates the latter part of the mediated relationship. The second essay examines firms’ international risk-taking activities in the context of the U.S. upstream oil and gas industry. Specifically, we explore how U.S. upstream oil and gas firms respond to domestic factor market competition centered on finite proved reserves with their investment behaviors in domestic as well as in foreign markets. Our research delivers one clear message: firms engage in investment activities that enable them to avoid direct factor market competition. Within the domestic market, we conjecture that firms facing competition will increase their investment in riskier activities in pursuit of resources. Beyond the domestic market, firms are likely to avoid competition by seeking opportunities abroad; yet, they selectively do so by entering low-risk countries in search of resources. Once they enter low-risk countries, firms further engage less in risk-taking activities. Empirical analyses testing our hypotheses corroborate our ideas. Finally, the third essay looks into how firms management international risks. This study examines how U.S. multinational enterprises (MNEs) strategically respond to the risk of war in South Korea, which is prompted by North Korea’s continued threatening actions. We compare predictions of real options theory and risk diversification theory, both of which offer differing predictions on how MNEs utilize their global networks of subsidiaries when managing host country risks. Empirical results show that U.S. MNEs adopt the portfolio investment strategy (based on risk diversification theory) when facing the risk of war. However, we find that while the ownership structure of operations (wholly owned or joint venture) in South Korea does not moderate U.S. MNEs’ strategic choices, U.S. MNEs with more available foreign markets tend to shift toward operational flexibility (based on real options theory). By leveraging a unique context in which the risk of war influences MNEs’ strategic behaviors, we contribute to the literature by showing that MNEs’ operational flexibility and portfolio management strategies may become interchangeable, depending on the foreign investment of the MNEs’ configurations.



Business Administration, Management