IDEAS home Printed from https://ideas.repec.org/a/taf/applec/v29y1997i10p1365-1378.html
   My bibliography  Save this article

Divestment of foreign production operations

Author

Listed:
  • Gabriel Benito

Abstract

This study investigates some determinants fo the divestment of foreign manufacturing operations by Norwegian companies. To date, very few studies have taken a closer look at what might influence whether foreign subsidiaries are divested or not. Although foreign direct investment - in principle - represent long-term commitments to foreign manufacturing operations, divestments are in fact quite common. This study shows that more than half of a sample of foreig subsidiaries woned by Norwegian companies in 1982 wee divested within a period of ten years. The empirical findings indicate that foreign divestment is inversely related to economic growth in the host country, and that the propensity to divest is significantly higher for subsidiaries that had been acquired than for greenfield establishments. Also, related (horizontal) subsidiaries are less likely to be divested than unrelated (non-horizontal)subsidiaries.

Suggested Citation

  • Gabriel Benito, 1997. "Divestment of foreign production operations," Applied Economics, Taylor & Francis Journals, vol. 29(10), pages 1365-1378.
    • Handle: RePEc:taf:applec:v:29:y:1997:i:10:p:1365-1378
    DOI: 10.1080/00036849700000027
    as

    Download full text from publisher

    File URL: http://www.tandfonline.com/doi/abs/10.1080/00036849700000027
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1080/00036849700000027?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Shapiro, Daniel & Khemani, R. S., 1987. "The determinants of entry and exit reconsidered," International Journal of Industrial Organization, Elsevier, vol. 5(1), pages 15-26, March.
    2. Morck, Randall & Shleifer, Andrei & Vishny, Robert W, 1990. "Do Managerial Objectives Drive Bad Acquisitions?," Journal of Finance, American Finance Association, vol. 45(1), pages 31-48, March.
    3. David Audretsch, 1994. "Business Survival and the Decision to Exit," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 1(1), pages 125-137.
    4. Kravis, Irving B. & Lipsey, Robert E., 1982. "The location of overseas production and production for export by U.S. multinational firms," Journal of International Economics, Elsevier, vol. 12(3-4), pages 201-223, May.
    5. Kobrin, Stephen J., 1980. "Foreign enterprise and forced divestment in LDCs," International Organization, Cambridge University Press, vol. 34(1), pages 65-88, January.
    6. Jiatao Li, 1995. "Foreign entry and survival: Effects of strategic choices on performance in international markets," Strategic Management Journal, Wiley Blackwell, vol. 16(5), pages 333-351.
    7. Akhter, Syed H. & Choudhry, Yusuf A., 1993. "Forced withdrawal from a country market: Managing political risk," Business Horizons, Elsevier, vol. 36(3), pages 47-54.
    8. repec:bla:kyklos:v:44:y:1991:i:3:p:363-82 is not listed on IDEAS
    9. Bruce Kogut, 1988. "Joint ventures: Theoretical and empirical perspectives," Strategic Management Journal, Wiley Blackwell, vol. 9(4), pages 319-332, July.
    10. Peter J. Buckley & Mark Casson, 1991. "The Future of the Multinational Enterprise," Palgrave Macmillan Books, Palgrave Macmillan, edition 0, number 978-1-349-21204-0, March.
    11. J. Fred Weston, 1989. "Divestitures: Mistakes Or Learning," Journal of Applied Corporate Finance, Morgan Stanley, vol. 2(2), pages 68-76, June.
    12. Gabriel R G Benito & Geir Gripsrud, 1992. "The Expansion of Foreign Direct Investments: Discrete Rational Location Choices or a Cultural Learning Process?," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 23(3), pages 461-476, September.
    13. Jean‐Francois Hennart, 1988. "A transaction costs theory of equity joint ventures," Strategic Management Journal, Wiley Blackwell, vol. 9(4), pages 361-374, July.
    14. B. Curtis Eaton & Richard G. Lipsey, 1980. "Exit Barriers are Entry Barriers: The Durability of Capital as a Barrier to Entry," Bell Journal of Economics, The RAND Corporation, vol. 11(2), pages 721-729, Autumn.
    15. Jamuna Agarwal, 1980. "Determinants of foreign direct investment: A survey," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 116(4), pages 739-773, December.
    16. Jean J Boddewyn, 1979. "Foreign Divestment: Magnitude and Factors," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 10(1), pages 21-26, March.
    17. Pennings, J.M. & Barkema, H.G. & Douma, S.W., 1994. "Organizational learning and diversification," Other publications TiSEM 2cabb122-340f-4729-afb3-9, Tilburg University, School of Economics and Management.
    18. Lecraw, Donald J, 1984. "Diversification Strategy and Performance," Journal of Industrial Economics, Wiley Blackwell, vol. 33(2), pages 179-198, December.
    19. Grubaugh, Stephen G, 1987. "Determinants of Direct Foreign Investment," The Review of Economics and Statistics, MIT Press, vol. 69(1), pages 149-152, February.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Bell, J.H.J., 1996. "Joint or Single Venturing? : An Electric Approach to Foreign Entry Mode Choice," Other publications TiSEM 06f84735-3cf5-432f-8bc8-c, Tilburg University, School of Economics and Management.
    2. Reuer, Jeffrey J. & Ariño, Africa, 2000. "Governance changes in strategic alliances: Antecedents of contractual renegotiations," IESE Research Papers D/415, IESE Business School.
    3. Borsos-Torstila, Julianna, . "The Determinants of Foreign Direct Investment Operations of Finnish MNCs in Transition Economies 1990-1995," ETLA A, The Research Institute of the Finnish Economy, number 28, June.
    4. Hutzschenreuter, Thomas & Lewin, Arie Y. & Dresel, Stephan, 2011. "Governance modes for offshoring activities: A comparison of US and German firms," International Business Review, Elsevier, vol. 20(3), pages 291-313, June.
    5. Arora, Ashish, 1999. "Exploring the internalization rationale for international investment: wholly owned subsidiary versus technology licensing in the worldwide chemical industry," DEE - Working Papers. Business Economics. WB 6430, Universidad Carlos III de Madrid. Departamento de Economía de la Empresa.
    6. Wu, Yan & Strange, Roger & Shirodkar, Vikrant, 2021. "MNE divestments of foreign affiliates: Does the strategic role of the affiliate have an impact?," Journal of Business Research, Elsevier, vol. 128(C), pages 266-278.
    7. Slangen, Arjen & Hennart, Jean-François, 2007. "Greenfield or acquisition entry: A review of the empirical foreign establishment mode literature," Journal of International Management, Elsevier, vol. 13(4), pages 403-429, December.
    8. Piaskowska, D., 2005. "Essays on firm growth and value creation," Other publications TiSEM 89053610-79c6-4c52-9d1c-6, Tilburg University, School of Economics and Management.
    9. Cristina López-Duarte & Esteban García-Canal, 1998. "La estructura de propiedad de la inversión directa exterior," Investigaciones Economicas, Fundación SEPI, vol. 22(1), pages 19-44, January.
    10. Stienstra, Miranda, 2020. "The determinants and performance implications of alliance partner acquisition," Other publications TiSEM 7fdee0c2-d4d2-4f5b-95e3-2, Tilburg University, School of Economics and Management.
    11. repec:dgr:rugsom:05g07 is not listed on IDEAS
    12. Drogendijk, H.J., 2001. "Expansion patterns of Dutch firms in Central and Eastern Europe : Learning to internationalize," Other publications TiSEM 18571cef-0dd0-46ff-82aa-3, Tilburg University, School of Economics and Management.
    13. Thomas Hutzschenreuter & Arie Y. Lewin & Stephan Dresel, 2011. "Time to Success in Offshoring Business Processes," Management International Review, Springer, vol. 51(1), pages 65-92, February.
    14. Manuel Portugal Ferreira & Cláudia Frias Pinto & Fernando Ribeiro Serra, 2014. "The transaction costs theory in international business research: a bibliometric study over three decades," Scientometrics, Springer;Akadémiai Kiadó, vol. 98(3), pages 1899-1922, March.
    15. Cristina López-Duarte & Marta M. Vidal-Suárez & Belén González-Díaz & Nuno Rosa Reis, 2016. "Understanding the relevance of national culture in international business research: a quantitative analysis," Scientometrics, Springer;Akadémiai Kiadó, vol. 108(3), pages 1553-1590, September.
    16. Isabel Faeth, 2009. "Determinants Of Foreign Direct Investment – A Tale Of Nine Theoretical Models," Journal of Economic Surveys, Wiley Blackwell, vol. 23(1), pages 165-196, February.
    17. Garg, Miti & Delios, Andrew, 2007. "Survival of the foreign subsidiaries of TMNCs: The influence of business group affiliation," Journal of International Management, Elsevier, vol. 13(3), pages 278-295, September.
    18. Agarwal, Jamuna Prasad & Gubitz, Andrea & Nunnenkamp, Peter, 1991. "Foreign direct investment in developing countries: the case of Germany," Open Access Publications from Kiel Institute for the World Economy 423, Kiel Institute for the World Economy (IfW Kiel).
    19. Tang, Jianyun & Rowe, W. Glenn, 2012. "The liability of closeness: Business relatedness and foreign subsidiary performance," Journal of World Business, Elsevier, vol. 47(2), pages 288-296.
    20. Arte, Pratik & Larimo, Jorma, 2019. "Taking stock of foreign divestment: Insights and recommendations from three decades of contemporary literature," International Business Review, Elsevier, vol. 28(6), pages 1-1.
    21. Wu, Jie & Pangarkar, Nitin & Wu, Zefu, 2016. "The moderating effect of technology and marketing know-how in the regional-global diversification link: Evidence from emerging market multinationals," International Business Review, Elsevier, vol. 25(6), pages 1273-1284.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:taf:applec:v:29:y:1997:i:10:p:1365-1378. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Chris Longhurst (email available below). General contact details of provider: http://www.tandfonline.com/RAEC20 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.