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1 – 10 of 887Ebrahim Merza and Omar Alhussainan
This paper aims to investigate the drivers of foreign direct divestment (FDD), how it relates to foreign direct investment (FDI) flows and stocks and its implications for…
Abstract
Purpose
This paper aims to investigate the drivers of foreign direct divestment (FDD), how it relates to foreign direct investment (FDI) flows and stocks and its implications for developing countries. While divestment occurs for various reasons, it can be explained by reversing the propositions implied by FDI theories.
Design/methodology/approach
The authors combine FDI data and FDI theories to provide theoretical explanations for FDD and what it means for developing countries. FDI stock and flow data are used to derive inferences on trends in FDD and examine the implications of FDI theories on FDD.
Findings
Changes in the modes of global production and the rise of COVID-19 have reinforced the trend of stagnant or diminishing FDI flows observed since the global financial crisis, with implications for FDD. The authors demonstrate how the various FDI theories can be used to explain FDD, except for the currency areas hypothesis. By reviewing the costs and benefits of FDI, it is concluded that shrinking FDI flows and stocks may not be as detrimental for developing economies as it is typically portrayed.
Originality/value
The paper uses two original approaches to measure and explain the motives for FDD. The first is a reassessment of FDI theories in a way that makes them valid theories for FDD. The second original approach is to interpret data on FDI flows and stocks to imply the trends governing FDD, which is useful, as data on foreign divestment are not available on a country or regional basis.
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This paper aims to enhance empirical research on foreign divestment and international relocation by multinational firms are still limited and understudied, although these issues…
Abstract
Purpose
This paper aims to enhance empirical research on foreign divestment and international relocation by multinational firms are still limited and understudied, although these issues have been a frequent phenomenon and carry important economic implications.
Design/methodology/approach
The paper investigates the trends of foreign divestment in South Korea and examines firm- and host country-level determinants in total, manufacture and service sectors from 2010 to 2019.
Findings
Using probit model analysis, the main findings are first, among the firm-level factors, sales revenue and parent firm dummy are shown as negative and significant determinants of foreign divestment especially in manufacturing sector. Second, among the country-level factors, gross domestic product growth rate and regulatory quality that measures perceptions of sound policies that promote private sector development are shown negative and significant determinants of foreign divestment. On the other hand, relationship between the environmental policy stringency and foreign divestment is shown positive and significant.
Originality/value
The results suggest that these nonfirm-specific characteristics are also important factors in firm decision to divest from the host country.
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Samson Edo and Obianuju Nnadozie
The purpose of this paper is to determine how macroeconomic performance work with institutional quality influences divestment of foreign direct investment (FDI) in Sub-Saharan…
Abstract
Purpose
The purpose of this paper is to determine how macroeconomic performance work with institutional quality influences divestment of foreign direct investment (FDI) in Sub-Saharan Africa, in the short and long run.
Design/methodology/approach
This paper investigates divestment of FDI in Sub-Saharan Africa, within the period 1980–2020. The investigation is undertaken by first comparing the trend with what is obtained in other economic regions of the world. The factors behind the divestment are subsequently investigated, using the vector error-correction model.
Findings
In the comparative analysis, Sub-Saharan Africa and other regions are observed to have witnessed sustained divestment in recent years. The estimation results of the model reveal that macroeconomic performance and institutional quality are the predominant drivers behind the divestment.
Research limitations/implications
The findings, however, do not conform to the neoclassical theory that lays emphasis on investment return as the fundamental factor influencing investment. Long-run structural stability is also established; hence, the results may be considered suitable for predicting future divestment in the region.
Practical implications
In view of the empirical findings, macroeconomic performance and institutional quality need to be improved to ameliorate FDI divestment in Sub-Saharan Africa.
Originality/value
There is paucity of research works on divestment of FDI in Sub-Saharan Africa. Again, there is paucity of works on how macroeconomic and institutional conditions work together to influence divestment. This study provides some evidence to bridge the perceived gaps.
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Jihad Ait Soussane, Dalal Mansouri and Zahra Mansouri
This study aims to identify the impact of foreign direct investment (FDI) on economic growth in Morocco depending on each origin country, including Spain. This study uses a linear…
Abstract
Purpose
This study aims to identify the impact of foreign direct investment (FDI) on economic growth in Morocco depending on each origin country, including Spain. This study uses a linear model to measure the marginal impact of FDI on the growth of Morocco. This marginal effect allows to compare the different effects of FDI among countries of origin. Also, the marginal effect helps to measure the rate of substitution between FDI in an easier way than the other specifications of the model. The second step determines the substitute for Spain in case he decides to divest its FDI from Morocco to maintain the economic growth.
Design/methodology/approach
Using data of FDI from 13 countries of origin from 1995 to 2020 and two estimation methods (Dynamic Ordinary Least Squares and Autoregressive model), this study aims to measure the marginal impact of the divestment of FDI from Spain on growth. Then this study estimates how much Morocco should attract FDI from other countries when Spain divests. This study uses the differential calculus, assuming a perfect substitution between FDI from different countries. This calculus implies an indifference curve between FDI from Spain and FDI from another country where we deduct the substitution rates between FDI.
Findings
The results indicate that the FDI from Spain and France are the only ones to impact positively Moroccan economic growth. The FDI coming from Germany, Holland, China and Turkey have a negative impact, whereas those from the USA, Italy, UK, Switzerland and Gulf countries: Saudi Arabia, Kuwait and UAE have an insignificant effect. Second, using the differential calculus, the result indicates that when Spain divests 1m dirhams of its investments from Morocco, France would have to increase its own by 0.1509m dirhams so that Morocco could maintain its economic growth.
Research limitations/implications
The research focuses only on economic growth, neglecting the impact on other aggregates, such as total factor productivity, technology transfer and employment. Also, this research marginalized the sectorial analysis of FDI by the source to better understand the divergent effects.
Originality/value
This paper fills a research gap when analyzing the effect of FDI on the host economy depending on country-of-origin. In addition, it contributes to the body of literature by constructing the rate of substitution between the different sources of FDI to adapt to divestment policy.
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Viacheslav Iurkov and Gabriel R.G. Benito
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…
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.
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Weliswa Matekenya and Clement Moyo
The purpose of this study is to investigate the effect of foreign direct divestments (FDD) on economic growth and development in South Africa for the period 1991–2019.
Abstract
Purpose
The purpose of this study is to investigate the effect of foreign direct divestments (FDD) on economic growth and development in South Africa for the period 1991–2019.
Design/methodology/approach
The non-linear autoregressive distributed lag technique is used for the empirical analysis. Two regression models are specified, one for economic growth and the other for development which is proxied by poverty.
Findings
The empirical results suggest that foreign divestments are detrimental to both economic growth and development. Furthermore, the results suggest that the negative effects of foreign divestments outweigh the positive effects of FDI inflows.
Practical implications
South African policymakers should thus use policies that promote the retention of FDI inflows together with those that attract inflows. Furthermore, policies that promote economic freedom such as transparency and reduction in the time frame for granting government permits for business operations are also of paramount importance.
Originality/value
Most of the available literature on FDD focuses on the firm perspective. Available studies on the effect of FDD on economic growth do not investigate the effect of divestment on economic development. Economic growth is a necessary but not a sufficient condition for the achievement of socioeconomic development.
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The purpose of this paper is to critically diagnose the current body of knowledge on de-internationalisation from the perspective of its various antecedents and implications for…
Abstract
Purpose
The purpose of this paper is to critically diagnose the current body of knowledge on de-internationalisation from the perspective of its various antecedents and implications for firms and to identify key research gaps and formulate recommendations for future research.
Design/methodology/approach
Contrary to many reviews of international business literature, this paper adopts a deductive approach by applying theory-driven dimensions of internationalisation to extant research so as to identify key developments and research gaps.
Findings
Among existing studies, attention has been consistently devoted to divestments, reductions of operating modes and foreign market withdrawals, while neglecting other crucial dimensions. Moreover, while financial effects of divestments have been frequently studied, the competitiveness implications of de-internationalisation have widely been neglected.
Research limitations/implications
Further research should consider de-internationalisation phenomena from the viewpoint of several interrelated aspects, as well as shift attention from studying failure to studying optimisation. More attention should be devoted to changes in the organisation of multinational enterprises in line with a changing degree of internationalisation.
Practical implications
The review provides a comprehensive synthesis of extant knowledge on the antecedents, forms and outcomes of de-internationalisation, which is of particular interest for decision-makers responsible for international expansion. This topic has been mostly neglected due to the sensitive character of the underlying decisions. The understanding of the determinants and consequences of de-internationalisation processes can contribute to a more conscious management of foreign operations.
Originality/value
The paper draws on the research paradigm of strategic management research, as well as international business literature, to refine the understanding of de-internationalisation and provide a contribution to this still under-researched area.
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Purpose – Investigate the causes and consequences of foreign financial institutions' divestments in China's banking sector which is an example of cross-border transactions by…
Abstract
Purpose – Investigate the causes and consequences of foreign financial institutions' divestments in China's banking sector which is an example of cross-border transactions by institutional investors.
Methodology – Use a sample of 26 foreign financial institutions' strategic investments in Chinese banks. Ten of those investments are divested after the global financial crisis. We investigate determinants of the divestment, business cooperation after the divestment, and Chinese banks' stock price reactions to the divestment announcement.
Findings – The poor performance of foreign financial institutions, which is attributable to the global financial crisis, and the institutions' regulated low equity ownership are important causes of divestment (or whole divestment). In contrast, Chinese banks' poor performance does not cause foreign divestments. Foreign financial institutions that fully divest their equity stakes usually terminate their cooperative business, which was required by the strategic investment agreement. The Bank of China and the China Construction Bank, which experienced large H-share divestments, experienced large economic declines in A-share values.
Social implications – Foreign financial institutions' strategic investments created substantial shareholder value before the divestment. Banking sector developments that rely on foreign investments are vulnerable to economic downturns in developed countries.
Originality/value of paper – To the best of our knowledge, this is the first trial to analyze the impact of divestments on divested bank performance.
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Pedro Silva and António Carrizo Moreira
The existing literature suggests that multinational corporations (MNCs) divest subsidiary units whenever they cease to enjoy the advantages of ownership, location or…
Abstract
Purpose
The existing literature suggests that multinational corporations (MNCs) divest subsidiary units whenever they cease to enjoy the advantages of ownership, location or internalization. However, not all MNCs divest under these conditions. This paper aims to explore the factors that contributed to the survival of a particular subsidiary and prevented it from being divested.
Design/methodology/approach
The analysis focuses on an individual subsidiary of a large foreign MNC in the electronics industry, which divested other subsidiaries from Portugal. Data were collected using semi-structured interviews.
Findings
The subsidiary’s diverse customer base, specificity and high level of efficiency, the local advantages, the existing governmental agreements and the parent MNC’s previous unsuccessful relocation experiences seem to have contributed to the survival of the subsidiary.
Research limitations/implications
Although the results of the case study are not generalizable to the entire population of firms, the featured case study is a rare survival success story in the Portuguese electronics industry.
Practical implications
The proposed framework may offer public authorities measures to create conditions to encourage firms to retain their investment in a particular site. For corporate strategists, new perspectives on subsidiary survival are provided.
Originality/value
This paper is one of the few qualitative studies in the field of subsidiary survival. The results offer an integrative framework on which factors contribute to the survival of a subsidiary located on a comparatively unfavorable labor cost location and support the role of the organizational learning and of previous failed relocation experiences and relocation barriers when a parent MNC decides whether to retain a unit.
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