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"SUBSIDIARY DIVESTMENTS DECISIONS OF FDIS: PARENT FIRM FINANCIAL PERFORMANCE AND MODERATORS” (It is nominated among the best 30 papers of the conference)
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The authors advance a conceptual model of channel member satisfaction that distinguishes between economic and noneconomic satisfaction. The resulting model then is tested using meta-analysis. Meta-analysis enables the empirical investigation of a model involving several constructs that never have been examined simultaneously within an individual study. More specifically, the authors unify the stream of research on power use—the focus of many satisfaction studies in the 1970s and 1980s—with more recent work on trust and commitment, which usually explores antecedents other than power use. The results indicate that economic satisfaction and noneconomic satisfaction are distinct constructs with differential relationships to various antecedents and consequences. Furthermore, this study demonstrates that satisfaction is both conceptually and empirically separable from the related constructs of trust and commitment.
Foreign direct investment (FDI) is usually defined as a cross-border in-vesünent made by a company for the purpose of acquiring a lasting eqa1, uity interest in a foreign enterprise, and thereby exert a considerable degree of influence on the operations of that enterprise. A FDI represents in other words a long-term commitment to a foreign operation. Exits-or divestments-seem nevertheless to be far from uncommon. Boddew-yn (1979)-one of the first international business scholars who paid attention to foreign divestment-mentions that while the l g0 largest u.S. based multinationals added some 41200 subsidiaries to their nerworks between the years 1967 to 1975, more than 2,400 affiliãtes were divested during the same period. some more ¡ecent studies suggest that the number of divestments is indeed quite significant: for example, pad-manabhan (1993) identified 421 divestments of European subsidiaries by U.K. companies in the 1983-1992 period; Häkkinen (tgg4) reporrs that Finnish companies had divested almosr 900 foreign subsidiaries in the period 1978-1992; and Barkema, Bell, and pennings (1996) in a study of the longevity of FDIs made by large Dutch multinationals found that of 225 FDIs made in the period 1966-19gg, iust over half of them were still in existence in 1988. Nl¡hile a vast theoretical and empirical literature examining the determinants of entry into foreign operations has emerged in recent yea.s66, 65. The author rhanks Mats Forsgren, Geir Gripsrud, steen Thomsen and Lawrence S. velch for valuable comments and suggestions on an earlier version of this paper. 66. See Cantwell (1991) for a review of rhis literarure.
In tis article the subject of de-internationalization is examined from the perspective of a number of streams of literature. These contributions are then extended through the development of a conceptual model which links decision-making on de-internationalization to the broader context of international operations and company performance in general.
In stigmatized industries characterized by social contestation, hostile audiences, and distancing between industry insiders and outsiders, firms facing media attacks follow different strategies from firms in uncontested industries. Because firms avoid publicizing their tainted-sector membership, when threatened, they can respond by divesting assets from that industry. Our analyses of the arms industry demonstrate that media attacks on the focal firm and its peers both increase the likelihood of divestment for the focal firm. Specifically, attacks on the focal firm are the most consequential, followed by attacks on peers in the same industry subcategory, and by attacks on peers in different subcategories. These findings shed new light on divestment as a response to media attacks in stigmatized industries and lead us to rethink impression management theory.
Drawing on the chain-of-effects model as a unifying framework, this meta-analysis indicates that firm innovativeness indirectly affects firm value through its effects on market position and financial position. In addition, the findings suggest that innovativeness has direct positive effects on financial position and firm value. Moreover, the metaanalysis provides evidence of reverse causality in the innovativeness-firm value relationship. Importantly, the results also reveal that the positive effects of firm innovativeness on market position and financial position are stronger for larger firms, for firms that invest more in advertising, for firms in high-tech industries, for innovativeness outputs and for radical innovations. Finally, the meta-analytic evidence also indicates that the relationship between innovativeness and firm value is stronger for smaller firms, for firms that invest more in advertising, for firms in lowtech industries, for innovativeness inputs, for innovativeness culture, and for radical innovations.
This study focuses on the role of geography in foreign subsidiary survival in host countries afflicted with political conflict. We argue that survival is a function of exposure to conflicts, which depends on the characteristics of place (the conflict zone) and space (geographic concentration and dispersion of other home-country firms). The roles of place and space are explored using street-level analysis of geographic information systems data for 670 Japanese MNE subsidiaries in 25 conflict-afflicted host countries over 1987–2006. Through dynamic modeling of conflict zones as stretchable and shrinkable places relative to subsidiary locations, we develop a means of characterizing a foreign subsidiary’s exposure to multiple threats in its geographic domain. Our results show that greater exposure to geographically defined threats, in both a static and a dynamic sense, reduces the likelihood of MNE survival. The findings indicate moreover that both concentration and dispersion with other firms affect survival; however, the effects depend on where (whether the firm is in a conflict zone) and with whom (home-country peers or sister subsidiaries) the firm is spatially located.
This article integrates institutional theory and organizational learning perspective and proposes a contingency framework on the relationship between ownership strategies and subsidiary performance. Using a sample of Japanese subsidiaries worldwide, the article finds important main effects of ownership, institutional distance, and host country experience on subsidiary survival. Furthermore, the effect of ownership is contingent on institutional distance and host country experience. In institutionally distant countries, subsidiaries have better survival chances if foreign parents have more ownership. Host country experience has a negative impact on subsidiary survival, but the effect is weaker if foreign parents have larger ownership positions in the subsidiaries.
This study examined behavioral explanations for the divestitures of formerly acquired units, particularly organizational inertia. It was argued that characteristics of parent firms and divested units reduce the likelihood of divesting a poorly performing unit. Conversely, it was also argued that change of key personnel and effective governance mechanisms increase the likelihood of such divestitures. Importantly, the results show that with age and size combined, appointment of new outside directors and divestiture experience (among other variables) moderated the effects on the likelihood of firms divesting units they had previously acquired. Implications for future theory development and management practice are also discussed.
A number of well-known studies report that between one-third and two-thirds of international joint ventures eventually break up. While many generalizations, explanations, and prescriptions have been based on these statistics, their meaning is unclear. First, all foreign affiliates are subject to normal business risk, and to the risk that they will be divested by parents for strategic or financial reasons. Are these risks higher for joint ventures than for wholly-owned subsidiaries? Second, joint ventures may be shorter lived not because of their joint venture status, but because affiliates which are joint ventured have other characteristics that make them more likely to exit. To know whether joint ventures are shorter lived, one must control for the other factors that affect the longevity of affiliates, whether wholly owned or joint ventured. Third, many joint ventures contracts contain clauses that allow partners to sell their stakes to one another at specific intervals. Because they make exit easier, joint ventures should have shorter lives, but these shorter lives should only be due to sell-offs, not to liquidations. It is therefore important to see whether the supposedly higher termination rate of joint ventures stakes is due to a higher rate of selloffs or to a higher rate of liquidations. In this paper we (1) compare the longevity of stakes in joint ventures versus those in wholly-owned subsidiaries (2) while controlling for other factors that affect the longevity of such stakes and (3) while distinguishing between two types of exit, those through sale and those through liquidation. While past authors have addressed these three issues in piecemeal fashion, we believe we are the first to address them simultaneously. We analyze the factors that affect the longevity of 355 Japanese stakes in U.S. manufacturing affiliates. Controlling for all the factors that affect exit rates, we find that Japanese parents are more likely to terminate their stakes in U.S. joint ventures than in wholly-owned subsidiaries. This higher termination rate of joint venture stakes is explained by a higher probability of selling them, but not of liquidating them. Most of the other factors that have been found significant in explaining gross divestment of foreign affiliates do in fact only affect exits through sales, but not exits through liquidations. Hence it is true that joint ventures have shorter lives, but dangerous to interpret this finding as necessarily meaning that they are more likely to "fail".
The purpose of this study is to examine the potential of business exit for initiating strategic change in divesting parent firms. In contrast to prior literature that mainly investigates the impact of different antecedents on the likelihood of business exit in general, this study additionally tests the influence of these antecedents on the choice between two exit types with a cross-industry sample of divesting firms listed in the German CDAX over the time period 1999–2004. A divestiture involving strategic change is a strategic business exit; otherwise it is denoted as status quo preserving. The findings reveal that a relatively highly dissipated focus does not automatically enhance the likelihood of business exit in general and status-quo-preserving business exit in particular. CEO turnover and pressures exerted by institutional investors predict neither strategic nor status-quo-preserving business exit. Low firm performance does not nurture the likelihood of business exit per se but especially promotes status-quo-preserving business exit.
The authors examine the growth and survival of international joint ventures (IJVs) from a legiti-macy perspective. In a sample of 291 Sino-Japanese joint ventures in China, they found that Chi-nese parent age, Chinese parent size, and IJV industry relatedness to either parent had a positive effect on IJV growth and/or survival. However, IJV industry relatedness to both parents led to lower rates of IJV growth and survival. The findings highlight the importance for IJVs to obtain both external and internal legitimacy, as well as the difficulties IJVs face in acquiring internal legitimacy from both parents simultaneously.
This study examines the determinants of FDI survival of Korean manufacturing firms. To identify the factors affecting FDI survival, transaction cost theory was employed in order to analyze the relationships of both the market transaction cost and organizational management cost with the survival length of affiliates. Results show that the factors derived from transaction cost theory have the effect of shortening the life of a joint venture compared to wholly-owned affiliates, and if the FDI is undertaken through acquisition, the more diversified the parent, the more likely it is for the investment to be terminated. Cultural distance, political risk, and exit barrier are found to have partial effects as well. Among control variables, market growth rate, company size, and exchange rates are shown to affect the survival of FDI.
Researchers in corporate strategy have long argued that resource "relatedness" contributes to a firm's competitive advantage. One implication is that entries made by a firm into businesses that are closely related to the firm's existing businesses should have higher survival rates than entries by the firm into unrelated businesses. In contrast to this traditional view, we offer a distinct perspective in which relatedness increases a firm's likelihood of abandoning new businesses. Using a sample of more than 1,200 market entries in the U.S. telecommunications sector during 1989-2003, we show that the rate of market exit increased with the relatedness of the new business to the firm's existing businesses.
p> This paper examines the causes of MNCs’ divestments in China. The MNCs’ profitability, market shares and productivities are negatively related to the possibility of divestment, while the MNCs’ debts are positively related to the possibility that foreign investments are divested. These results suggest that divestments are affected by MNCs’ performances, and their performances are endogenous shocks for divestment.
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The Oxford Handbook of International Business contain articles by distinguished scholars in the field of international business. The authors are all authorities on their chosen topics and have been active as leaders in the Academy of International Business. Their articles survey and synthesize relevant literature of recent years. The book is split into five major sections, providing comprehensive coverage of the following areas: the history and theory of the multinational enterprise; the political and policy environment of international business; strategies of multinational enterprises; the financial areas of the multinational enterprise (marketing, finance and accounting, Human Resource Management [HRM], and innovation); and business systems in Asia, South America, and the transitional economies.
The goal of this study is to examine the short-term performance effects of a firm's decision to divest foreign affiliates that are part of an integrated international production network. Previous literature stresses positive investor reactions toward divestment announcements in the short run. Stockholders seem to expect positive long-term performance effects from refocusing strategies. When evaluating the actual financial consequences of divestments, however, it is unclear whether the benefits of divesting unprofitable production locations will outweigh the costs that arise from withdrawal in the short run. By evaluating outcomes of the remaining network, this study suggests that withdrawing countries from a production network leads to an immediate decline in performance. Efficiency gains that result from more favorable labor cost conditions across the remaining locations, on the other hand, can mitigate the negative performance effects of divestments. A panel analysis of 631 foreign production networks maintained by German manufacturing firms supports the hypotheses.
Although research on foreign market entry and expansion behavior has attracted significant interest in the literature, there is a general lack of research (either conceptual or empirical) on the exit behavior of international companies. To address this issue, the authors develop a conceptual framework to understand firms' foreign exit behavior. The objective is to lay the conceptual foundation for subsequent empirical research in this area. A series of research propositions have been advanced that can guide hypothesis generation for future research. Copyright © 2015 by Emerald Group Publishing Limited All rights of reproduction in any form reserved.
Prior studies of multimarket contact have investigated " exploitation" rather than "exploration" activities. We contrast effects of multimarket contact on entry and exit dynamics in these two settings and propose that, although in exploitation, firms seek to optimize multimarket contact based on mutual forbearance benefits, in exploration, firms instead seek to reduce uncertainties through mimetic entry and exit. Analyses of biopharmaceutical firms' competitive dynamics from 1989 to 1999 support our model. We also find that multimarket contact in exploration leads to competitive entry and exit in exploitation, but not vice versa. We discuss implications for theory and practice.
Because of the "opaque" nature of divestitures, investors face considerable uncertainty in evaluating divestiture decisions and thus may look to a firm's social context, defined in terms of the pervasiveness of divestiture activity in its industry, to infer the quality of such a decision. Specifically, we propose that a firm's position in an industry divestiture wave conveys information about whether or not managers are imitating their industry peers, which in turn will influence how investors perceive and assess the quality of the decision and its likely performance consequences. Supporting this theoretical argument, we find that the relationship between divestiture position and stock market returns exhibits a U-shaped pattern, with divestitures that occur at the peak of an industry divestiture wave generating the lowest stock market returns. We also find that industry characteristics (e.g., munificence) reinforce the effect of position in wave on investor response. Our study is the first to incorporate the role of a firm's social context, assessed in terms of the pervasiveness of an activity, as an important factor that influences how investors perceive and evaluate divestiture decisions.
We take the multinational flexibility perspective and examine the conditions under which multinational corporations’ (MNCs’) foreign manufacturing subsidiaries in labor-intensive industries are not divested from their host country markets under the influence of their host country’s rising labor costs. We examine in this paper the effects of intra-firm product shifts within the same MNC network on foreign subsidiary divestment. We utilize a panel of data of Korean MNCs’ foreign subsidiaries in labor intensive industries and employ a Cox proportional hazard rate model as an event history analysis methodology on STATA 10. We find that intra-firm product shifts within the same MNC network reduce the probability of subsidiaries exposed to rising labor costs in their host countries being divested earlier. We also find that greater cross-country labor cost differentials and more country options in the same MNC network are helpful in facilitating intra-firm product shifts and lowering divestiture rates of the subsidiaries. Contrastingly, we find from control variables that weaker performing, smaller, and stand-alone subsidiaries, in riskier countries, facing currency appreciation, and increasing labor costs are more likely to divest. We conclude from our findings that MNCs are able to enhance multinational flexibility by using intra-firm trade connections among affiliated firms in flexible responses to cross-border cost and value differentials.
We examine the relationship between strategic change and CEO compensation by studying how a firm's refocusing program influences CEO compensation after completing the change. We contribute to the ‘settling up’ literature by arguing that strategic change is often uncertain for both the CEO and the board of directors responsible for executive compensation. As such the firm is likely to settle up with the CEO by paying for compensation risk and effort undertaken during refocusing after the extent and impact of strategic change are better known. We find that refocusing intensity is positively related to post-refocusing CEO total compensation, suggesting that ‘settling up’ through post hoc compensation is an important factor in strategic change. We also find that prior firm performance, governance structure and industry dynamism are important moderators of this relationship. © 2013 John Wiley & Sons, Ltd.
In this study, we examine the impact of cross-national distance on the divestment of foreign affiliates. On the basis of the nine dimensions of cross-national distance (Berry et al. 2010. “An Institutional Approach to Cross-National Distance.” Journal of International Business Studies 41 (9): 1460-1480), we empirically examine the impact of each measure of distance on the divestment of affiliates. Using a data set of 1697 multinational corporations (MNCs) headquartered in Korea and their 2435 affiliates in 67 host countries from 2000 to 2010, we find that distance created by economic, financial, political, administrative, cultural, demographic, knowledge and global connectedness leads to the divestment of foreign affiliates. We also find that the positive relationship between cross-national distance and affiliate divestment is likely to become stronger when an MNC enters the host country through a joint venture and weaker for affiliates with greater experience in the host country.
Resource dependence theory has been widely applied to explain interindustry acquisitions, but little is known about how external and internal dependence conditions affect the divestiture of formerly acquired subunits. We argue that subunit divestiture may be a strategic response to mutual dependence and subunit power following acquisition. Our results, based on a sample of divested subunits by U.S. public firms, show that mutual dependence and increased subunit power both reduce the hazard of subunit divestiture. However, the negative effect of mutual dependence diminishes to the extent that subunit power increases, suggesting that increased subunit power may shift away from the mutual-dependence logic. We discuss the implications of these findings to advance the theory of interindustry divestiture.
We examine how multinational corporations’ (MNCs) foreign subsidiaries enhance their performance through flexible intra-firm adjustments and reduce their exit ratio under exchange rate changes in their host countries. We analyze Korean MNCs where foreign subsidiaries engage in intra-firm sales or purchases of product with counterpart affiliates with opposite price competitiveness. Results show that such subsidiaries can enhance their performance and thereby reduce their exit rates within their host countries. We also find that high host market uncertainty or large subsidiary investment size positively moderates the impact of a subsidiary's performance—enhanced through flexible adjustments through intra-firm trade—on its exit.
This study examines the dual implications of dual-option subsidiaries on exit decisions during times of economic crisis. Retaining dual-option subsidiaries in crisis-stricken countries means leaving a shadow option open for future growth once a crisis ends. However, MNCs may encounter problems pursuing either option due to challenges in managing dual-option subsidiaries with clashing strategic mandates.
The equivocal nature of dual-option subsidiaries points to the possibility of another factor playing an important moderating role in exit decisions—subsidiary performance—which has been rarely considered in the MNC real options literature. Our primary argument is that lower subsidiary performance increases the influence of shadow option value embedded in dual-option subsidiaries.
Analyzing a sample of 703 Korean overseas manufacturing subsidiaries in Asian countries, we find that when profitability falls, subsidiaries with dual options are less likely to be exited than those with single options.
In this paper, we examine how market conditions in host countries affect the entry and exit decisions of multinational corporations' foreign subsidiaries. Taking the real options perspective, we expect that smaller investments will be associated with more flexible entries and exits. We also predict that better-established host countries with greater institutional and financial development will facilitate the exits of foreign subsidiaries with smaller investments under unfavorable market conditions. We run a Cox proportional hazard rate model with a dataset of Korean foreign direct investments, and find that when market conditions become more unfavorable, foreign subsidiaries making smaller investments that were endogenously chosen under the influence of market demand uncertainty are more likely to engage in earlier exits than subsidiaries making larger investments. We also find that strong institutional and financial development positively moderates small subsidiaries' exits under conditions of unfavorably resolved uncertainty.
This paper examines the role which the long term orientation (LTO) dimension of host country culture plays in transforming multinational corporations’ (MNCs’) focus from transaction cost to transaction value in the context of MNC subsidiary ownership and survival. We used a sample of 10,236 overseas subsidiaries established by 1,291 Japanese MNCs in 29 host countries with varying levels of LTO to test our hypotheses. Results first showed that LTO has a direct positive effect on ownership levels. Second, we observed that there were positive interactions between LTO and cultural distance, and between LTO and geographic distance, on ownership levels. Third, we found that there were positive interactions between LTO and subsidiary ownership level, and between LTO and cultural distance, on subsidiary survival. The theoretical and practical implications of these findings are discussed in terms of the vital role LTO plays in determining whether transaction value or transaction cost considerations prevail in MNCs’ ownership strategies, and how MNCs can better take advantage of host country LTO and improve the survival likelihood of their subsidiaries.
We examine how the exits of multinational companies’ foreign subsidiaries from host countries are foreshadowed by the irreversibility intrinsic to firms’ entry modes and the environmental uncertainty in host countries. For empirical testing, we run a Cox proportional hazard rate model on STATA 10 and deploy a dataset of Korean foreign direct investments (FDIs) for the period 1990–2007. We find a negative association between the greater irreversibility typical of wholly owned Greenfield investments or full acquisitions and subsidiary exits. We also note that host market uncertainty strengthens the impact of irreversible entry modes on subsidiary exits. Our findings support the argument that irreversible investments and uncertain environments are closely related to the probability of a subsidiary exiting.
This paper studies the internationalization behaviour of French companies using more than 330,000 observations for three two-year intervals. We analyse the ‘symmetric’ role of productivity and other major firm attributes to characterize companies that enter into and exit from foreign markets. High levels of productivity are documented to be characteristic of companies deciding to engage in exporting or foreign direct investment (FDI). However, there does not seem to be a significant correlation between productivity and divestment decisions. Moreover, companies with corporate shareholders are more likely to intensify their international engagement and to retain their cross-border activities. Finally, high levels of short-term and long-term debt tend to increase the likelihood of entry into a more intense international engagement.
This article focuses on discrete choice analysis (DCA), which offers an effective approach for incorporating customer preferences into operating decisions in hospitality businesses. First the theoretical background of DCA is presented, including a discussion of how DCA compares to conjoint analysis. The authors then present a guide to designing and conducting a DCA study. Conducting a discrete choice study involves identifying the attributes relevant to customers'choices and the appropriate levels of these attributes, designing an experiment, collecting data and estimating parameters using a multinomial logit model. Finally, the strategic implications of DCA in hospitality management research are discussed.
The embeddedness of interfirm relationships in a social structure can engender order in new tie formation, but competitive incentives may undermine the order that firms seek to achieve and lead to tie dissolution. We examine how relational embeddedness (history of interactions), positional embeddedness (network centrality), and structural embeddedness (common partners) influence tie stability, focusing on unplanned joint venture dissolution. Prior work suggests that relational embeddedness facilitates alliance stability. This study shows that positional embeddedness does not promote stability, but structural embeddedness does help sustain alliances, particularly when partners have strong incentives to pursue self-interest at the expense of joint benefits.
While numerous empirical studies have examined the relationship between corporate divestiture and subsequent firm performance, inconsistent findings persist, suggesting the need for a quantitative synthesis and an examination of potential moderating effects. The authors conduct a meta-analysis of the divestiture-performance relationship, encompassing 650 effect sizes from 94 studies. Results indicate that across studies, corporate divestiture does positively impact subsequent performance. The analysis also suggests statistically significant moderating effects of type of performance measure, transaction format, transaction intent, and firm’s resource level. While providing a quantitative synthesis of current empirical findings, the authors call for further research to surface additional moderators to refine the knowledge concerning the link between corporate divestiture and subsequent performance.
This article empirically investigates the determinants of firms’ use of explicit call options to acquire equity in their international joint ventures (IJVs). Such options are an important contractual element of IJVs because they allow a firm to secure a claim on future expansion opportunities and to safeguard itself against various exchange hazards. The authors therefore draw on real options and transaction cost arguments, respectively, to develop hypotheses on the circumstances under which firms use such options. The article underscores the importance of studying the design of alliances in finer grained terms and helps refine the application of real options theory in the alliance context.
We argue that foreign firms operating in a host country generate information spillovers that have potential value for later foreign direct investment. We test two predictions. First, we expect foreign direct investments by firms with experience in a host country to be more likely to survive than investments made by first-time entrants. Second, foreign direct investments will be more likely to survive the greater the foreign presence in the target industry at the time of investment, subject to two contingencies. The first contingency is that the relationship will be weak or nonexistent among firms with no experience in the host country, because these firms have difficulty evaluating and taking advantage of the information spillovers. The second contingency is that the presence of other foreign firms will not affect investment survival among firms that already have a presence in the target industry and undertake expansion. These firms already possess general information about the target industries and are unlikely to gain additional benefit from information spillovers. We find supportive evidence based on the survival to 1992 among 354 U.S. investments undertaken by foreign firms in manufacturing industries during 1987. © 1997 by John Wiley & Sons, Ltd. Strat. Management J. Vol. 18: 811-824, 1997 No of Figures: 1. No of Tables: 3. No of References: 35.
The majority of unrelated acquisitions are divested shortly after their purchase. Often, those acquisitions-turned-divestitures result in strategic, organizational, and financial losses for both the acquiring and the acquired companies. To consider how such divestitures can be avoided, this study examined some of the differences between divested and retained unrelated acquisitions. The study integrated four explanations for why unrelated acquisitions occur and related them to the fates of such acquisitions. Unrelated acquisitions were hypothesized to be divested when they fail to realize some motives and expectations that prevailed at the time of acquisition. Two samples of unrelated acquisitions (135 from 1977 and 140 from 1987) were tracked over 5-year periods. The results indicate that motives and conditions at the time of acquisition, and changes in those motives and conditions, were related to the fates of the acquisitions. In addition, the relative importance of those factors varied across the periods studied. Discriminant analyses further demonstrate that most divestitures could be predicted correctly on the basis of those motivations and conditions. The implications of the findings are discussed. © 1997 John Wiley & Sons, Ltd.
Dynamic capabilities manifest the organizational capacity to purposefully create or modify the firm's resource base. In this paper, we consider resource divestment an important firm-level resource management capability that manifests a two-step organizational change routine. Firms must first be motivated to engage in resource divestment, and then decide which resources should be ‘sold off.’ In exploring this firm-level capability, we employ factor market theory to consider the ‘seller side’ of the market, and provide a useful framework for conceptualizing how firms generate competitive advantage through resource divestment. We test our model of the resource divestment capability with a dataset of professional baseball franchises during the period 1969–83. Copyright © 2007 John Wiley & Sons, Ltd.
This study proposes that international joint ventures (IJVs) are terminated either when the initial purposes of the formation of the IJV have been achieved (intended termination), or when unanticipated contingencies that emerge in the external, internal, or inter-partner conditions after the establishment of the IJV impede the continuation of its operation (unintended termination). Our study examines the factors that affect intended and unintended termination and the longevity of IJVs. The findings show that approximately 90 percent of all IJV terminations are unintended and 10 percent intended, and that the frequency of intended termination and unintended termination varies noticeably depending on the initial purposes of formation. This suggests that the termination of IJVs is significantly contingent on their formation. The findings also show that the longevity of IJVs varies according to the initial purposes of formation, the initial conditions under which the IJV is formed, and the types of unanticipated contingencies that it encounters. The key theoretical issues and practical implications of the distinction between the intended and unintended termination of IJVs are also discussed. Copyright © 2007 John Wiley & Sons, Ltd.
In this study, we combine social exchange and knowledge-based perspectives to develop a general path model of IJV survival. We further refine our expectations by considering the transitional economic context of our study and the somewhat unique managerial values resulting from the legacy of Marxist ideology. Results from structural equation modeling suggest that an imbalance in the management control structure between the parents leads to parental conflict and an increased likelihood of IJV failure. An imbalance in the ownership control structure, however, had no influence on conflict or survival. In general, support from the foreign parent is positively related to IJV learning and IJV survival. However, higher levels of technical support provided by the foreign parent to the IJV reduced the level of parental conflict, whereas management support had no effect on conflict. Our results suggest some dilemmas for firms pursuing IJVs in transitional economies. Although the foreign parent often contributes critical resources to the IJV, providing it with bargaining power and a high level of influence, an imbalance in management control between the partners may ultimately be detrimental to IJV survival. Copyright © 2000 John Wiley & Sons, Ltd.
Longitudinal data are used to examine how knowledgeshapes the innovative environment of an entering firm and to determine howdifferent environments affect entrant survival. After a review of relevantliterature, it is hypothesized that entrants with a knowledge advantage and ahigh number of innovation opportunities are less likely to exit than otherentrants. A second hypothesis suggests that entry size moderates the relationshipbetween the innovative environment and the likelihood of exit in such a waythat an aligned innovative environment (i.e., one in which knowledge exists intandem with innovation opportunities) is more crucial for small entrants thanfor large entrants. Data on the entry and exit of 3,431 firms in 33 manufacturing industries areused to test the hypotheses. Drawn from the Thomas Register of AmericanManufacturers and covering the period between 1908 and 1991, the datasupport both hypotheses. The results demonstrate how the knowledge intensity ofthe industry and scale of entry combine to determine the likelihood of entrantsurvival. (SAA)
This paper examines the implications of real options theory for both the decision to divest a business unit and the mode of divestment. It is shown that the decision to divest a business unit and the decision to engage in staged modes of divestment are both sensitive to uncertainty, consistent with the real options logic. However, in the face of uncertainty, the results suggest that staged forms of governance create real options that are of lesser value as compared to simply not divesting a business unit. Thus, this study shows that firms have real options of varied value to choose from in the context of divestments.
This study integrates research on the financial performance of multinational firms with research on foreign subsidiary survival. We examined the influences a firm's intangible assets and its experience have on foreign subsidiary survival and profitability using a sample of 3,080 subsidiaries of 641 Japanese firms. The results show survival and profitability have different antecedents. Host country experience has a direct effect on survival but a contingent relationship with profitability. The entry mode moderated the nature of these relationships.