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

30 Pages Posted: 14 Jan 2008

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. This article 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 to their global counterparts.

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 & Insurance, Vol. 74, No. 2, pp. 493-522, June 2007, Available at SSRN: https://ssrn.com/abstract=987408 or http://dx.doi.org/10.1111/j.1539-6975.2007.00222.x

Cassandra R. Cole

Florida State University - College of Business ( email )

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

Ryan B. Lee (Contact Author)

Royal Roads University ( email )

2005 Sooke Road
Victoria, British Columbia V9B 5Y2
Canada

Kathleen A. McCullough

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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