Work

Performance and business relatedness as drivers of exit decision: A study of MNCs from an emerging country

Year: 2017

Type: article

Abstract: Research Summary This study examines the exit behavior of emerging market MNCs in the context of the parent company (PC)‐foreign affiliate (FA) relationship. Specifically, we consider business relatedness as a moderating variable and examine its impact on the relationship between an FA’s international performance and its exit decision from a foreign market. Our results, based on data collected from multiple informants in 180 Chinese firms, indicate that product relatedness and intangible resource relatedness have different moderating impacts on the FA performance‐FA exit decision relationship. Implications of these findings, along with the limitations of the study, are discussed. Managerial Summary Although the research on international entry and expansion is particularly important, an aspect that has been largely ignored in the literature is the exit behavior of firms. This study examines whether the extent to which a foreign subsidiary is similar to its parent's core business may influence the firm's exit decision. The findings indicate that managers are more likely to exit a poorly performing FA if there is a high (vs. low) level of product relatedness between the FA and its PC's core business. The results also suggest that intangible resource relatedness exerts a different contingent effect on the FA performance‐FA exit relationship than does product relatedness.

Source: Global Strategy Journal

DOI: 10.1002/gsj.1170

Authors: Qun Tan, Carlos M. P. Sousa

Institutions: Xiamen University, Durham University

Language: English

Topic: International Business and FDI

Subfield: Strategy and Management

Field: Business, Management and Accounting

Domain: Social Sciences

Open Access status: green

Funders: Ministry of Education of the People's Republic of China, Scientific Research Foundation for Returned Scholars of Ministry of Education

Award: G6659054384