Domestic Alliance Formation and the Foreign Divestment Decisions of Firms

Abstract

This study examines the effect of domestic alliances on firms’ foreign divestment decisions. We argue that foreign subsidiaries face a higher risk of being divested when firms form new alliances with other firms in their home country. Alliances at home involve resources and may divert attention away from international operations. Also, opportunities emerging from entering into new relationships with other firms domestically may lead firms to reconfigure their value chain activities and resources across locations, thereby increasing the probability of foreign divestment. Using data from the electronic and electrical equipment industries in the USA over the period 2001–2008, we empirically investigate the link between domestic alliances and foreign divestment. We find that increases in domestic interfirm collaboration indeed significantly affect firms’ propensity to divest foreign operations.

Citation

Iurkov, V. and Benito, G.R.G. (2017), "Domestic Alliance Formation and the Foreign Divestment Decisions of Firms", Verbeke, A., Puck, J. and Tulder, R.v. (Ed.) Distance in International Business: Concept, Cost and Value (Progress in International Business Research, Vol. 12), Emerald Publishing Limited, Leeds, pp. 517-538. https://doi.org/10.1108/S1745-886220170000012004