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How do political and market exposure nurture ambidexterity?

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  • Jiménez, Alfredo
  • Boehe, Dirk
Abstract
We empirically examine the simultaneous relationship between international market scope and political risk in the foreign direct investment (FDI) portfolio of multinational enterprises. We argue that firms can take advantage of their experience interacting with governments in risky locations when entering new markets and benefit from international diversification advantages. At the same time, companies with investments in a larger number of countries can adopt a more risk-tolerating approach and enter riskier locations in subsequent investments where they expect higher returns as a consequence of lower competition and a more efficient leverage of their existing knowledge and routines. We analyze a sample of 164 Spanish firms using a 3SLS simultaneous equation model and show that higher levels of political risk in FDI portfolios lead to broader international market scopes and vice-versa. Our results emphasize the increasing relevance of market-political ambidexterity, the capability of simultaneously managing political and market challenges.

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  • Jiménez, Alfredo & Boehe, Dirk, 2018. "How do political and market exposure nurture ambidexterity?," Journal of Business Research, Elsevier, vol. 89(C), pages 67-76.
    • Handle: RePEc:eee:jbrese:v:89:y:2018:i:c:p:67-76
    DOI: 10.1016/j.jbusres.2018.03.016
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