A Strategic-Options Perspective for the Management of Subsidiaries in Emerging Markets: The Case of China

Multinational companies ("MNCs") increasingly reach out for emerging markets for growth and income. The subsidiaries in emerging markets are therefore of strategic importance to MNCs. But compared to more mature environments, the strategic management under a high level of uncertainty requires a more flexible structure which allows a swift response to change. This dissertation proposes to apply a strategic-options perspective to the management of subsidiaries in emerging markets which incorporates a systematic sense of such flexibility. Beyond their pure financial value to the holding company, subsidiaries also have a strategic value as platform investments providing strategic options for a particular market and serve as a vehicle for organizational learning. Both aspects are of fundamental value for strategic positioning in highly uncertain markets which have been somewhat neglected in the international management literature. It is argued here that subsidiaries can be conceptualized as strategic options to MNCs, consisting of options to grow and to abandon the operations, as well as the option to defer/learn either decision. The different types of options are discussed and the research project will further examine the characteristics as well as boundary conditions for options. In the context of China, the author plans to empirically examine whether the data supports the hypothesis that an options-approach is indeed financially and strategically superior to the alternative large-scale pre-emptive commitment (investment) route. The results of this inquiry could have substantial implications for the management practice in emerging markets and provide a valuable contribution to the international management and real option literature.

Aufenthaltsort: Hong Kong, China
Referent: Prof. Dr. Li Choy Chong (ARC-HSG)