Do Multinationals Operate Flexibly? Theory and Evidence

Do multinational enterprises operate flexibly, i.e., do they shift production in response to currency changes? Three theoretical perspectives are developed. Flexibility optimism, premised on information and sunk cost advantages, takes a macro efficiency perspective and predicts sizable responses. Flexibility pessimism, premised on inertia and internal opportunism, takes an organizational perspective and predicts sticky responses. Flexibility...