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Managerial Incentives, Internalization, and Market Valuation of Multinational Firms

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  • Chandra S Mishra

    (Oregon State University)

  • David H Gobeli

    (Oregon State University)

Abstract

This paper examines the role of firm technology investment, in concert with managerial incentives alignment, to explain the relative market value compared to the accounting value for a multinational firm. The results are consistent with internalization theory in that greater multinationality corresponds to a higher valuation of the firm if technology investment is high, and the impact is even greater if managerial incentives alignment is high as well. However, greater multinationality alone does not correlate to a significantly greater value, which differs from the tenets of imperfect capital markets theory.© 1998 JIBS. Journal of International Business Studies (1998) 29, 583–597

Suggested Citation

  • Chandra S Mishra & David H Gobeli, 1998. "Managerial Incentives, Internalization, and Market Valuation of Multinational Firms," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 29(3), pages 583-597, September.
    • Handle: RePEc:pal:jintbs:v:29:y:1998:i:3:p:583-597
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    Cited by:

    1. R. Jared DeLisle & Mengying Wang & H. Zafer Yüksel & Gulnara R. Zaynutdinova, 2024. "The effects of import competition on domestic financial markets: The role of limits-to-arbitrage," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 55(2), pages 212-234, March.
    2. Kyaw, NyoNyo A. & Manley, John & Shetty, Anand, 2011. "Factors in multinational valuations: Transparency, political risk and diversification," Journal of Multinational Financial Management, Elsevier, vol. 21(1), pages 55-67, February.
    3. Yong Yang & Nigel Driffield, 2012. "Multinationality-Performance Relationship," Management International Review, Springer, vol. 52(1), pages 23-47, February.
    4. Chari, Murali D.R. & Devaraj, Sarv & David, Parthiban, 2007. "International diversification and firm performance: Role of information technology investments," Journal of World Business, Elsevier, vol. 42(2), pages 184-197, June.
    5. Aggarwal, Raj & Berrill, Jenny & Hutson, Elaine & Kearney, Colm, 2011. "What is a multinational corporation? Classifying the degree of firm-level multinationality," International Business Review, Elsevier, vol. 20(5), pages 557-577, October.
    6. Ruize Cai & Kyung Hwan Yun & Minho Kim, 2022. "Financing Constraints and Corporate Value in China: The Moderating Role of Multinationality and Ownership Type," Sustainability, MDPI, vol. 14(19), pages 1-22, September.
    7. Wooster, Rossitza B. & Paul, Donna L., 2016. "Leadership positioning among U.S. firms investing in China," International Business Review, Elsevier, vol. 25(1), pages 319-332.
    8. Laszlo Tihanyi & Robert E. Hoskisson & Richard A. Johnson & William P. Wan, 2009. "Technological Competence and International Diversification," Management International Review, Springer, vol. 49(4), pages 409-431, September.
    9. repec:dgr:rugsom:05g07 is not listed on IDEAS
    10. Tan, Danchi & Mahoney, Joseph T., 2002. "An Empirical Investigation of Expatriate Utilization: Resource-Based, Agency, and Transaction Costs Perspectives," Working Papers 02-0129, University of Illinois at Urbana-Champaign, College of Business.
    11. Rodgers, Waymond & Degbey, William Y. & Housel, Thomas J. & Arslan, Ahmad, 2020. "Microfoundations of collaborative networks: The impact of social capital formation and learning on investment risk assessment," Technological Forecasting and Social Change, Elsevier, vol. 161(C).
    12. Frederik Dahlmann & Layla Branicki & Stephen Brammer, 2017. "‘Carrots for Corporate Sustainability’: Impacts of Incentive Inclusiveness and Variety on Environmental Performance," Business Strategy and the Environment, Wiley Blackwell, vol. 26(8), pages 1110-1131, December.
    13. Garbe, Jan-Nicolas & Richter, Nicole Franziska, 2009. "Causal analysis of the internationalization and performance relationship based on neural networks -- advocating the transnational structure," Journal of International Management, Elsevier, vol. 15(4), pages 413-431, December.
    14. Nuno Calheiros-Lobo & José Vasconcelos Ferreira & Manuel Au-Yong-Oliveira, 2023. "SME Internationalization and Export Performance: A Systematic Review with Bibliometric Analysis," Sustainability, MDPI, vol. 15(11), pages 1-36, May.
    15. Wu, Yan & Strange, Roger & Shirodkar, Vikrant, 2022. "Lateral knowledge transfer and foreign affiliate performance: The importance of affiliate strategic roles," Economic Modelling, Elsevier, vol. 116(C).
    16. Berrill, Jenny & Kearney, Colm, 2010. "Firm-level internationalisation and the home bias puzzle," Journal of Economics and Business, Elsevier, vol. 62(4), pages 235-256, July.
    17. Dixit Manjunatha Betaraya & Saboohi Nasim & Joy Mukhopadhyay, 2018. "Subsidiary Innovation in a Developing Economy: Towards a Comprehensive Model and Directions for Future Research," FIIB Business Review, , vol. 7(2), pages 109-125, June.
    18. Eckert, Stefan & Dittfeld, Marcus & Muche, Thomas & Rässler, Susanne, 2010. "Does multinationality lead to value enhancement? An empirical examination of publicly listed corporations from Germany," International Business Review, Elsevier, vol. 19(6), pages 562-574, December.
    19. Nicole Franziska Richter, 2014. "Information Costs in International Business: Analyzing the Effects of Economies of Scale, Cultural Diversity and Decentralization," Management International Review, Springer, vol. 54(2), pages 171-193, April.
    20. Dikova, Desislava & Witteloostuijn, Arjen van, 2005. "Managerial satisfaction with subsidiary performance; the influence of the parent MNE's capabilities and the subsidiary's environment," Research Report 05G07, University of Groningen, Research Institute SOM (Systems, Organisations and Management).

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