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International Business Review

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Real options (Finance), Latin America -- Foreign economic relations -- United States


We develop a real option hierarchical model of entry mode choice and test predictions using a sample of US companies in Latin America and the Caribbean between 1980 and 2005. Probit results indicate that the choice between a real option non-equity mode and equity commitment is influenced by previous acquisition experience, R&D and advertising intensities, and country risk. The choice of the more flexible real option JV mode over WOEs is positively related to greater firm size and market-to-book ratio in countries with better infrastructure. In contrast, greater marketing intensity and lower country risk encourage WOEs.


This is a pre-print of an article which was subsequently published in the International Business Review. 25.1 (2016): 382-394. Copyright (2016) Elsevier

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