Subsidiaries in motion: Assessing the impact of sunk versus flexible assets

Abstract

This chapter addresses an unresolved theoretical issue in international business: the impact of existing, committed assets in a host location on parent and subsidiary decisions regarding the configuration of future value-adding activities for the location. We develop a measure of investment committedness, or the degree of flexibility versus specificity of existing assets in a host location, to explore this issue. The measure assesses whether assets, such as brands, human capital, process technologies, and supplier relations, retain only scrap value outside their current application or they can be redeployed to alternative value-adding activities in the host location or shifted offshore, eith..