Operating Flexibility, Global Manufacturing, and the Option Value of a Multinational Network Export

@article{citeulike:3808917, abstract = {The multinational corporation is a network of activities located in different countries. The value of this network derives from the opportunity to benefit from uncertainty through the coordination of subsidiaries which are geographically dispersed. We model this coordination as the operating flexibility to shift production between two manufacturing plants located in different countries. A stochastic dynamic programming model treats explicitly this flexibility as equivalent to owning an option, the value of which is dependent upon the real exchange rate. The model is extended to analyze hysteresis effects and within-country growth options. We show that the management of across-border coordination has led to changes in the heuristic rules used for performance evaluation and transfer pricing.}, author = {Kogut, Bruce and Kulatilaka, Nalin}, citeulike-article-id = {3808917}, citeulike-linkout-0 = {http://dx.doi.org/10.2307/2632849}, citeulike-linkout-1 = {http://www.jstor.org/stable/2632849}, doi = {10.2307/2632849}, issn = {00251909}, journal = {Management Science}, keywords = {flexibility, global, manufacturing, multinational, network, operating, option, value}, number = {1}, pages = {123--139}, posted-at = {2008-12-19 04:40:15}, priority = {3}, publisher = {INFORMS}, title = {Operating Flexibility, Global Manufacturing, and the Option Value of a Multinational Network}, url = {http://dx.doi.org/10.2307/2632849}, volume = {40}, year = {1994} }

TY - JOUR ID - citeulike:3808917 L3 - citeulike-article-id:3808917 N2 - The multinational corporation is a network of activities located in different countries. The value of this network derives from the opportunity to benefit from uncertainty through the coordination of subsidiaries which are geographically dispersed. We model this coordination as the operating flexibility to shift production between two manufacturing plants located in different countries. A stochastic dynamic programming model treats explicitly this flexibility as equivalent to owning an option, the value of which is dependent upon the real exchange rate. The model is extended to analyze hysteresis effects and within-country growth options. We show that the management of across-border coordination has led to changes in the heuristic rules used for performance evaluation and transfer pricing. IS - 1 JF - Management Science SN - 00251909 EP - 139 TI - Operating Flexibility, Global Manufacturing, and the Option Value of a Multinational Network PB - INFORMS VL - 40 SP - 123 KW - flexibility KW - global KW - manufacturing KW - multinational KW - network KW - operating KW - option KW - value AU - Kogut, Bruce AU - Kulatilaka, Nalin PY - 1994/// UR - http://dx.doi.org/10.2307/2632849 ER -