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How much does country matter? An analysis of firms’ growth options

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Abstract

Recent international strategy research emphasizes the importance of understanding the effects of geographic location on firms’ strategies and performance outcomes. We contribute to this research by providing empirical evidence that the interplay of country and industry effects matters substantially in explaining the variation in the value of growth options of firms based in different countries. Our results show that country–industry effects are the second largest source of variation, following firm effects, while industry and country effects are relatively small when considered in their own right. That valuable growth options are tied to country and industry interactions has important implications for international strategy research and practice.

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Notes

  1. For US firms, Compustat assigns a four-digit SIC classification to the firm's primary industry, which is determined by analyzing the sales breakdown reported in the firm's 10-K and annual reports. For international firms, Mergent Online relies on the reported primary SIC if the firm's ADR trades on US exchanges; otherwise, Mergent Online reviews the business descriptions provided by the firm and assigns it a primary four-digit SIC based upon the descriptions.

  2. We thank an anonymous reviewer for this suggestion.

  3. We thank an anonymous reviewer for this suggestion.

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Acknowledgements

We appreciate the useful comments we received from Department Editor Yadong Luo and the anonymous reviewers. Financial support was provided by the Small Grant at the School of Management at the State University of New York at Buffalo, the Earl V. Snyder Innovation Management Research Center and the Program in Entrepreneurship and Emerging Enterprises at the Whitman School of Management at Syracuse University, and the Jefferson-Pilot Faculty Development Fund at the Kenan-Flagler Business School at the University of North Carolina at Chapel Hill.

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Authors and Affiliations

  1. Leeds School of Business, University of Colorado, Boulder, USA

    Tony W Tong

  2. Whitman School of Management, Syracuse University, Syracuse, USA

    Todd M Alessandri

  3. Kenan-Flagler Business School, University of North Carolina, Chapel Hill, USA

    Jeffrey J Reuer

  4. College of Business Administration, Marquette University, Milwaukee, USA

    Asda Chintakananda

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  1. Tony W Tong
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  2. Todd M Alessandri
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  4. Asda Chintakananda
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Correspondence to Tony W Tong.

Additional information

Accepted by Arie Y Lewin, Editor-in-Chief and Yadong Luo, Departmental Editor, 7 June 2007. This paper has been with the authors for two revisions.

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Tong, T., Alessandri, T., Reuer, J. et al. How much does country matter? An analysis of firms’ growth options. J Int Bus Stud 39, 387–405 (2008). https://doi.org/10.1057/palgrave.jibs.8400355

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  • DOI: https://doi.org/10.1057/palgrave.jibs.8400355

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