Portfolio characteristics of outward foreign direct investment and dynamic performance of emerging economy firms: An option portfolio perspective |
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Authors: | Yuanyuan Huang En Xie Zhan Wu |
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Institution: | 1. Southwest Jiaotong University, School of Economics and Management, 111 Second Round Road, Chengdu, Sichuan, 610031, China;2. Tongji University, School of Economics and Management, Tongji Building A, Siping Road 1500, Shanghai, 200092, China;3. University of Sydney, Discipline of International Business, Sydney, Australia |
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Abstract: | In recent decades, emerging economy (EE) firms have taken an aggressive approach to international expansion. Drawing upon option portfolio theory, this study develops the characteristics of the OFDI portfolio based on two attributes of a portfolio and two dimensions of host environments. We examine how the characteristics of the OFDI portfolio dynamically influence the OFDI?performance linkage. Using a sample of 545 Chinese listed multinational firms during the period 2009–2018, we find EE firms’ OFDI contributes more to short-term performance when the OFDI portfolio features a higher overall quality of host institutions or a higher diversity of strategic factor market developments in the host countries. However, over a relatively long period, EE firms’ OFDI contributes more to long-term performance when the portfolio features a higher overall diversity of strategic factor markets and institutional environments. These findings offer further knowledge on the OFDI?performance link in emerging economies. |
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Keywords: | Outward foreign direct investment (OFDI) Portfolio characteristics Strategic factor market Institution Option portfolio theory |
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