Decades of research on foreign subsidiary divestment: What do we really know about its antecedents?. Issue 4 (August 2020)

• Record Type: Journal Article
• Authors: Schmid, David; Morschett, Dirk
• Is Part Of: International business review. Volume 29:Issue 4(2020:Aug.)
• Publication Date: 2020-08
• Subjects: Foreign subsidiary divestment -- International divestment -- Market exit -- Meta-analysis; International business enterprises -- Periodicals; 338.8805
• DOI: 10.1016/j.ibusrev.2019.101653
• Languages: English
• ISSNs: 0969-5931

Abstract

Highlights: We take stock of the literature on antecedents of foreign subsidiary divestment and integrate findings for 18 variables from 45 studies. Reasons for divestment are far more complex than the weak financial performance of a foreign subsidiary. Subsidiary level antecedents have stronger effects than parent firm or host country level antecedents. The resource-based view and the transaction cost theory seem to better explain foreign subsidiary divestment than the organizational learning theory or the institutional theory. We provide many implications for future research (e.g. investigating strategic motivations, testing the reversed eclectic paradigm). Abstract: Research on the antecedents of foreign subsidiary divestment has grown in the last decades. However, findings are ambiguous. We clarify this situation by providing, for 18 antecedent candidates from 45 articles, a descriptive picture of previous studies, theoretical arguments for the expected direction of effect, and a quantitative synthesis of the effects by means of meta-analysis. Ten variables significantly affect the likelihood of foreign divestment while the effects of eight antecedents are inconclusive. Overall, subsidiary level antecedents have stronger effects on the divestment likelihood than parent firm or host country characteristics. The resource-based view and the transaction cost approach appear to provide better explanations for foreign divestment than organizational learning theory or institutional theory. For the future research agenda, we propose investigating strategic motivations, taking a portfolio perspective, testing full conceptual models, considering multilevel data structures and using the reversed eclectic paradigm of Boddewyn as theoretical framework.