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Dual-Option Subsidiaries and Exit Decisions During Times of Economic Crisis

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Abstract

  • This study examines the dual implications of dual-option subsidiaries on exit decisions during times of economic crisis. Retaining dual-option subsidiaries in crisis-stricken countries means leaving a shadow option open for future growth once a crisis ends. However, MNCs may encounter problems pursuing either option due to challenges in managing dual-option subsidiaries with clashing strategic mandates.

  • The equivocal nature of dual-option subsidiaries points to the possibility of another factor playing an important moderating role in exit decisions—subsidiary performance—which has been rarely considered in the MNC real options literature. Our primary argument is that lower subsidiary performance increases the influence of shadow option value embedded in dual-option subsidiaries.

  • Analyzing a sample of 703 Korean overseas manufacturing subsidiaries in Asian countries, we find that when profitability falls, subsidiaries with dual options are less likely to be exited than those with single options.

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Authors and Affiliations

  1. Department of International Business, Korea University Business School, Korea University, Seoul, Korea

    Chris Changwha Chung

  2. Department of Organizations, Strategy and International Management, School of Management, University of Texas at Dallas, Richardson, TX, USA

    Seung-Hyun Lee

  3. Department of International Business, College of Business Management, Hongik University, Sejong, Korea

    Jeoung-Yul Lee

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  1. Chris Changwha Chung
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  2. Seung-Hyun Lee
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Correspondence to Chris Changwha Chung.

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Chung, C., Lee, SH. & Lee, JY. Dual-Option Subsidiaries and Exit Decisions During Times of Economic Crisis. Manag Int Rev 53, 555–577 (2013). https://doi.org/10.1007/s11575-012-0157-9

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  • DOI: https://doi.org/10.1007/s11575-012-0157-9

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