In my view, the level of multinational network of a firm has direct impacts on performance of the firm. This is because different investment locations offer different opportunities, benefits and challenges to the firms. For example, firms with high levels of multinational networks are usually faced with operational barriers such as varying government regulations, increase in costs of coordination and management of organizational resources and operations, increased diversity in cultures and institutional structures and unpredictable fluctuations of currency values in foreign countries. These barriers often affect their levels of performance in the different economies or countries. Therefore, for a firm with multinational networks to benefit from networking or improve its performance, the managers must make appropriate decisions regarding various investment strategies in different locations.
In addition, the multinational networks of a firm also affect its market value amongst shareholders in the industry. For instance, firms with higher levels of multinational networks that invest in advanced economies or countries are not highly valued by shareholders whereas if the same firm invests in less developed or developing economies, I would be highly valued by shareholders, thus leading to an increase in market value. On the other hand, firms with low levels of multinational network that invest in advanced countries are highly valued by shareholders, hence have high market values.
For my part, the level of multinational networking by firms only have considerable impact on the performance and market value of the firm if the company invests in different economies. Additionally, firms must take into consideration various risks associated with investing in advanced and developing countries. Some of these risks include political, institutional, economical and social risks.
Effect of Level of Economic Development in a Country on Decisions of Firms Regarding Network Configuration
The level of economic development in a country often affects investment decisions made by firms. Firms habitually tend to target investment locations in countries with highly developed or advanced economies because such locations often provide firms with ready markets for their products. This is because such locations are often composed of consumers with high levels of income, thus higher rates of consumption. In addition, advanced economies pose lesser risks to firms as compared to developing economies. On the other hand, developing countries also provide firms with abundant resources, cheap labor and high returns. Although such factors would attract more firms to developing economies, highly speculative firms usually tend to avoid developing economies due to the high risks involved in such locations.