A Test of the Eclectic Paradigm: Evidence from the U.S. Reinsurance Market

47 Pages Posted: 10 Nov 2005

See all articles by Cassandra R. Cole

Cassandra R. Cole

Florida State University - College of Business

Ryan B. Lee

Royal Roads University

Kathleen A. McCullough

Florida State University - College of Business

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Abstract

This study provides a test of the eclectic paradigm with data from U.S. reinsurers. The U.S. reinsurance industry provides a unique setting to test the eclectic paradigm due to the extensive data available on U.S. reinsurers and the well-developed literature related to reinsurance. The ability to test the hypotheses related to the eclectic paradigm in a service industry and incorporate industry-specific factors adds to the eclectic paradigm literature which has traditionally focused primarily on manufacturing firms. In addition, the application of the eclectic paradigm to the reinsurance industry provides an empirical framework that combines several prior streams of literature which examine the reinsurer's decision to internationalize. The current study includes firm-specific factors, country-specific factors of the international markets, and factors related to the U.S. reinsurance industry. The paper finds support for traditional factors impacting globalization such as host market size, loss experience, and competitiveness as well as reinsurer's ability to expand based on available capacity. Understanding the importance of firm-, country-, and industry-specific factors is key for managers, as analyzing these issues in isolation may lead to an incomplete picture of the factors impacting the internationalization decision, hindering managers' ability to make decisions that are in the best interest of the firm. With the continued interdependence of the world reinsurance marketplace, as well as the recent expansion of the European Union, internationalization issues are of critical importance not only to U.S. insurers, reinsurers and regulators, but also their global counterparts.

Keywords: Eclectic Paradigm, Reinsurance, Internationalization

JEL Classification: F23, G22

Suggested Citation

Cole, Cassandra R. and Lee, Ryan B. and McCullough, Kathleen A., A Test of the Eclectic Paradigm: Evidence from the U.S. Reinsurance Market. Journal of Risk and Insurance, Forthcoming, Available at SSRN: https://ssrn.com/abstract=840805

Cassandra R. Cole

Florida State University - College of Business ( email )

423 Rovetta Business Building
Tallahassee, FL 32306-1110
United States

Ryan B. Lee

Royal Roads University ( email )

2005 Sooke Road
Victoria, British Columbia V9B 5Y2
Canada

Kathleen A. McCullough (Contact Author)

Florida State University - College of Business ( email )

Department of Risk Management and Insurance
150 Rovetta Business Building
Tallahassee, FL 32306-1110
United States
850-644-8358 (Phone)
850-644-4077 (Fax)

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