ABSTRACT
This chapter focuses on the real options perspective to develop a parsimonious theoretical framework that accounts for uncertainty arising in the local environment, firm capabilities and the effect of this uncertainty on the mode of entry. The reason for the increasing interest in real options theory is the practical concern that strategic decisions are often made under uncertainty and the theoretical appeal that real options theory has in capturing managers' flexibility in adapting their future actions to changing market or technological conditions. The chapter aims to use real option reasoning to advance current theory and examine how uncertainty impacts multinational enterprises (MNEs) need for flexibility, control and learning in foreign markets and, in turn, the choice of entry mode. A number of studies have investigated various forms of uncertainty arising in the local environments of host countries and their effect on entry strategies of MNEs.
