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Multinational Firms and Plant Divestiture

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  • Pehr-Johan Norbäck
  • Ayça Tekin-Koru
  • Andreas Waldkirch

Abstract

Multinational firms not only make acquisitions, but also frequently divest affiliates. Affiliate divestiture is the result of many factors, some internal and some external to the firm. Using detailed confidential survey data of Swedish multinationals, we are able to examine divestiture decisions within the context of the world-wide affiliate network of the firm. In contrast, most existing studies of multinational exit focus on one country only. A model of mergers and acquisitions with financing constraints generates predictions regarding the correlation between affiliate size and the decision to sell. Consistent with this theory, we find that larger affiliates are more likely to be divested, but an increase in relative size of an affiliate reduces the probability of divestiture. Additional network characteristics, the presence of other affiliates nearby and sales of affiliates elsewhere, are also positively correlated with divestiture. We find no support for the notion of footloose multinationals.

Suggested Citation

  • Pehr-Johan Norbäck & Ayça Tekin-Koru & Andreas Waldkirch, 2015. "Multinational Firms and Plant Divestiture," Review of International Economics, Wiley Blackwell, vol. 23(5), pages 811-845, November.
    • Handle: RePEc:bla:reviec:v:23:y:2015:i:5:p:811-845
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    Cited by:

    1. Salamaga Marcin, 2021. "The use of Correspondence Analysis in the Study of Foreign Divestment in the Visegrad Countries during the Coronavirus Crisis," Econometrics. Advances in Applied Data Analysis, Sciendo, vol. 25(2), pages 15-26, June.
    2. Laura Resmini & Giuseppe Vittucci Marzetti, 2020. "Home bias in divestment decisions of multinational corporations in the EU," Review of International Economics, Wiley Blackwell, vol. 28(3), pages 799-813, August.
    3. Schmid, David & Morschett, Dirk, 2020. "Decades of research on foreign subsidiary divestment: What do we really know about its antecedents?," International Business Review, Elsevier, vol. 29(4).
    4. Ryan W. Tang & Ying Zhu & Hongbo Cai & Jinrong Han, 2021. "De-internationalization: A Thematic Review and the Directions Forward," Management International Review, Springer, vol. 61(3), pages 267-312, June.
    5. Ozkan, Kubilay S.L., 2020. "International market exit by firms: Misalignment of strategy with the foreign market risk environment," International Business Review, Elsevier, vol. 29(6).
    6. Aron Berg & Pehr-Johan Norbäck & Lars Persson, 2017. "Cross-border mergers & acquisitions with financially constrained owners," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 153(3), pages 433-456, August.
    7. Maria Borga & Perla Ibarlucea Flores & Monika Sztajerowska, 2020. "Drivers of divestment decisions of multinational enterprises - A cross-country firm-level perspective," OECD Working Papers on International Investment 2019/03, OECD Publishing.
    8. Laura Resmini & Giuseppe Vittucci, 2016. "Home country bias in divestment decisions of multinational corporations in the EU," ERSA conference papers ersa16p220, European Regional Science Association.
    9. Belderbos, René & De Michiel, Federico & Sleuwaegen, Leo & Wu, Shubin, 2021. "Global market integration, efficiency orientation, and drivers of foreign subsidiary divestments," Journal of World Business, Elsevier, vol. 56(5).
    10. David Schmid & Finn de Thomas Wagner & Dirk Morschett, 2021. "Archetypes of Driver Combinations Leading to Foreign Market Exit: An Investigation into European Grocery Retailing," Management International Review, Springer, vol. 61(4), pages 521-562, August.

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    More about this item

    JEL classification:

    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business

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