Sequential synchronization: location, product and ownership

Purpose This study adopts the multinational operational flexibility perspective to examine how the characteristics of the existing subsidiary portfolio influence the subsequent investment attributes of its subsidiaries. Specifically, we explore how the switching needs and opportunities associated with cross-border labor cost conditions influence a new subsidiary's location, product and ownership. Design/methodology/approach We employed a panel data analysis of Korean overseas manufacturing subsidiaries. We adopt binomial logit regression for three dependent variables, the last two nested within the first regression. Findings We find that higher labor cost uncertainty interacts with higher labor cost correlation among countries of existing subsidiaries, leading to a new subsidiary in a country with a negatively correlated labor cost. We also find that the locational choice is synchronized with a less localized product and higher ownership for global switchability. We additionally observe that this synchronization of investment attributes is more pronounced when managers are highly aware of switching options embedded in their international investments. Originality/value We examine the nested relationships of key investment decisions (location, product, ownership) from the multinational operational flexibility, which provides different explanations from other perspectives.