Abstract:
The Multinational Enterprise (MNE) is a network of equity-linked subsidiaries (intra-firm
network) that also has external and non-equity-linked (extra-firm) networks. One of the
ways that intra- and extra-firm networks can be understood is that each network has
obligation-free rights which can be seen as options.
While options afforded by the intra- and extra-firm network have different resources and
risk mitigation implications, most studies have explored MNE internationalisation using
equity options akin to intra-firm network options. Yet, the lower resource commitment in
the extra-firm networks is probably important for less-resourced firms.
Emerging market MNEs (EMNEs) have typically fewer resources than advanced market
MNEs (AMNEs). Thus, it is likely that these MNEs will internationalise using different
resource and risk mitigation options into African countries, which have varying risks
associated with differing levels of institutional development.
The relationships between MNE resources, internationalisation network options and
country risk, were evaluated using secondary historical data of publicly listed MNEs in
African countries for the period, 1997-2021. The study makes a methodological
contribution to the development of the Network Index to evaluate relative intra- and extrafirm
network internationalisation options. Hypotheses were evaluated using hierarchical
regression analysis.
I highlight the intra and extra-firm network options in the MNE portfolio for
internationalisation. This is important in explaining AMNE and EMNE internationalisation
using network options. The findings indicate support for real options theory predictions
of higher firm resources association with the exercise of intra-firm network
internationalisation options.
I establish the boundary of real options theory in risk mitigation predictions for
internationalisation into emerging markets of African countries. Both EMNEs and AMNEs
did not exercise lower-resourced, extra-firm network internationalisation options in the
presence of increasing country risk. I find that risk mitigation likely involves a combination
of network diversity and internalisation of institutional functions within each network.
However, the use of group level MNE data may also contribute to this finding.
