Journal Article

The role of operational flexibility in the expansion of international production networks

Zschoche, Miriam, Fisch, Jan Hendrik

2012

Overview

Volatile factor cost developments urge manufacturing firms to increase production efficiency by building up facilities in multiple countries. Differing from previous work that examines the quality of individual locations for investment, the study evaluates the net present value, the growth option value, and the operational flexibility value of the existing production network to predict the establishment of a new site. The results on a sample of 352 German manufacturing firms suggest that the direction, uncertainty, and diversity of labor cost movements in the extant locations influence the propensity to set up a new production subsidiary. Analyzing the international production network after the expansion shows that the new location increases the value of the network regarding these dimensions.

• Publisher: John Wiley & Sons, Ltd,John Wiley & Sons,Wiley,Wiley Periodicals Inc
• Subject: Ausländische Tochtergesellschaft / Betriebliche Standortwahl / Business networks / Capital costs / Commercial production / Deutschland / Expansionism / Financial investments / Financial portfolios / Flexibility / foreign direct investment / Foreign direct investments / Germany / Globalization / Host country / Industrie / international production networks / Internationale Produktion / Investment / Investors / Labor costs / Labor movements / location decision / Location of enterprises / Location of industry / Management science / Manufacturers / Manufacturing / Multinationales Unternehmen / Net present value / Networks / operational flexibility / Planning methods / Present value / Production / Production costs / Production management / Productivity / real options / Realoptionsansatz / Strategic management / Studies / Subsidiary / Uncertainty / Western Europe