Complex strategic choices: A new approach and Application to foreign firm agglomeration

Research output: Contribution to journalArticleScientificpeer-review

Abstract

Research summary

In this study, we introduce a new statistical technique to the field of strategy that accounts for complex interrelated decisions. The technique is meant for situations in which one strategic decision depends critically upon another—e.g., where companies must commit to one decision before making another. We demonstrate the value of the technique in the context of companies choosing countries in which to invest, followed by areas within those countries in which to locate their facilities. We then describe the generic benefits of the statistical technique, offer guidance for how to use it, and provide the programming code so that others can implement it. We explain how the technique is particularly well suited to problems in which companies must decide between multiple options and the sample size is small relative to the number of initial options.

Managerial summary

Research in strategy and international business has increasingly adopted two-stage models to account for endogeneity. Established approaches, however, deal most effectively with problems characterized by binary first-stage models. We introduce an alternative that allows for multiple choices in the first stage. We use the technique to examine the agglomeration patterns of foreign firms, while accounting for country selection. We find that, conditional on country selection, foreign firms tend to agglomerate in host countries characterized by collectivist cultures, political uncertainty, and economic uncertainty. The results imply that host country characteristics exert a strong influence on the agglomeration preferences of foreign firms. We provide guidance on when to use the empirical estimation technique and furnish details of the estimation procedure so that others can apply the technique to a broader class of selection problems.
Original languageEnglish
Pages (from-to)286–311
JournalGlobal Strategy Journal
Volume7
Issue number3
DOIs
Publication statusPublished - Aug 2017

Fingerprint

Agglomeration
Strategic choice
Foreign firms
Guidance
Host country
Stage model
Two-stage model
Sample size
Endogeneity
International business
Programming
Strategic decisions
Economic uncertainty
Political uncertainty
Decision making
Political economics

Keywords

  • agglomeration
  • selection/endogeneity
  • nonlinear models

Cite this

@article{13308cc9eada474d9afe7fd5df2b475e,
title = "Complex strategic choices: A new approach and Application to foreign firm agglomeration",
abstract = "Research summaryIn this study, we introduce a new statistical technique to the field of strategy that accounts for complex interrelated decisions. The technique is meant for situations in which one strategic decision depends critically upon another—e.g., where companies must commit to one decision before making another. We demonstrate the value of the technique in the context of companies choosing countries in which to invest, followed by areas within those countries in which to locate their facilities. We then describe the generic benefits of the statistical technique, offer guidance for how to use it, and provide the programming code so that others can implement it. We explain how the technique is particularly well suited to problems in which companies must decide between multiple options and the sample size is small relative to the number of initial options.Managerial summaryResearch in strategy and international business has increasingly adopted two-stage models to account for endogeneity. Established approaches, however, deal most effectively with problems characterized by binary first-stage models. We introduce an alternative that allows for multiple choices in the first stage. We use the technique to examine the agglomeration patterns of foreign firms, while accounting for country selection. We find that, conditional on country selection, foreign firms tend to agglomerate in host countries characterized by collectivist cultures, political uncertainty, and economic uncertainty. The results imply that host country characteristics exert a strong influence on the agglomeration preferences of foreign firms. We provide guidance on when to use the empirical estimation technique and furnish details of the estimation procedure so that others can apply the technique to a broader class of selection problems.",
keywords = "agglomeration, selection/endogeneity, nonlinear models",
author = "Zheying Wu and R. Salomon and Xavier Martin",
year = "2017",
month = "8",
doi = "10.1002/gsj.1161",
language = "English",
volume = "7",
pages = "286–311",
journal = "Global Strategy Journal",
issn = "2042-5805",
publisher = "John Wiley and Sons Inc.",
number = "3",

}

Complex strategic choices : A new approach and Application to foreign firm agglomeration. / Wu, Zheying; Salomon, R.; Martin, Xavier.

In: Global Strategy Journal, Vol. 7, No. 3, 08.2017, p. 286–311.

Research output: Contribution to journalArticleScientificpeer-review

TY - JOUR

T1 - Complex strategic choices

T2 - A new approach and Application to foreign firm agglomeration

AU - Wu, Zheying

AU - Salomon, R.

AU - Martin, Xavier

PY - 2017/8

Y1 - 2017/8

N2 - Research summaryIn this study, we introduce a new statistical technique to the field of strategy that accounts for complex interrelated decisions. The technique is meant for situations in which one strategic decision depends critically upon another—e.g., where companies must commit to one decision before making another. We demonstrate the value of the technique in the context of companies choosing countries in which to invest, followed by areas within those countries in which to locate their facilities. We then describe the generic benefits of the statistical technique, offer guidance for how to use it, and provide the programming code so that others can implement it. We explain how the technique is particularly well suited to problems in which companies must decide between multiple options and the sample size is small relative to the number of initial options.Managerial summaryResearch in strategy and international business has increasingly adopted two-stage models to account for endogeneity. Established approaches, however, deal most effectively with problems characterized by binary first-stage models. We introduce an alternative that allows for multiple choices in the first stage. We use the technique to examine the agglomeration patterns of foreign firms, while accounting for country selection. We find that, conditional on country selection, foreign firms tend to agglomerate in host countries characterized by collectivist cultures, political uncertainty, and economic uncertainty. The results imply that host country characteristics exert a strong influence on the agglomeration preferences of foreign firms. We provide guidance on when to use the empirical estimation technique and furnish details of the estimation procedure so that others can apply the technique to a broader class of selection problems.

AB - Research summaryIn this study, we introduce a new statistical technique to the field of strategy that accounts for complex interrelated decisions. The technique is meant for situations in which one strategic decision depends critically upon another—e.g., where companies must commit to one decision before making another. We demonstrate the value of the technique in the context of companies choosing countries in which to invest, followed by areas within those countries in which to locate their facilities. We then describe the generic benefits of the statistical technique, offer guidance for how to use it, and provide the programming code so that others can implement it. We explain how the technique is particularly well suited to problems in which companies must decide between multiple options and the sample size is small relative to the number of initial options.Managerial summaryResearch in strategy and international business has increasingly adopted two-stage models to account for endogeneity. Established approaches, however, deal most effectively with problems characterized by binary first-stage models. We introduce an alternative that allows for multiple choices in the first stage. We use the technique to examine the agglomeration patterns of foreign firms, while accounting for country selection. We find that, conditional on country selection, foreign firms tend to agglomerate in host countries characterized by collectivist cultures, political uncertainty, and economic uncertainty. The results imply that host country characteristics exert a strong influence on the agglomeration preferences of foreign firms. We provide guidance on when to use the empirical estimation technique and furnish details of the estimation procedure so that others can apply the technique to a broader class of selection problems.

KW - agglomeration

KW - selection/endogeneity

KW - nonlinear models

U2 - 10.1002/gsj.1161

DO - 10.1002/gsj.1161

M3 - Article

VL - 7

SP - 286

EP - 311

JO - Global Strategy Journal

JF - Global Strategy Journal

SN - 2042-5805

IS - 3

ER -