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Should I stay or should I go? The influence of managerial self-interest on foreign exit decisions

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  • Tan, Qun
  • Sousa, Carlos M.P.

Abstract

Based on the agency theory and the social exchange theory, this study investigates how foreign affiliate (FA) managers can utilise two mechanisms that the principal adopts to deal with the agency problem of influencing the foreign divestment/non-divestment decision of the headquarters (HQ). Specifically, we examine whether and under which conditions FA managers’ self-interest affects the decision of the HQ to divest a foreign market. Using secondary and primary data collected from multiple informants in Chinese firms engaged in outward foreign direct investment (OFDI), we find that although the FA managers’ self-interest has no direct impact on the HQ’s foreign divestment decision, the HQ is less likely to divest the foreign market when the FA manager holds a high level of trust in the HQ. Furthermore, when the FA is locally embedded in the foreign host market, the manager’s self-interest has the strongest negative impact on the HQ’s foreign divestment decision.

Suggested Citation

  • Tan, Qun & Sousa, Carlos M.P., 2023. "Should I stay or should I go? The influence of managerial self-interest on foreign exit decisions," Journal of Business Research, Elsevier, vol. 168(C).
    • Handle: RePEc:eee:jbrese:v:168:y:2023:i:c:s0148296323005726
    DOI: 10.1016/j.jbusres.2023.114213
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    References listed on IDEAS

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    1. Konara, Palitha & Ganotakis, Panagiotis, 2020. "Firm-specific resources and foreign divestments via selloffs: Value is in the eye of the beholder," Journal of Business Research, Elsevier, vol. 110(C), pages 423-434.
    2. Nguyen, Ha Thi Thu & Larimo, Jorma & Ghauri, Pervez, 2022. "Understanding foreign divestment: The impacts of economic and political friction," Journal of Business Research, Elsevier, vol. 139(C), pages 675-691.
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