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Divestment of foreign production operations

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Author Info
Gabriel R. G. Benito

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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.

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Publisher Info
Article provided by Taylor and Francis Journals in its journal Applied Economics.

Volume (Year): 29 (1997)
Issue (Month): 10 (October)
Pages: 1365-1378
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Handle: RePEc:taf:applec:v:29:y:1997:i:10:p:1365-1378

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. 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. [Downloadable!] (restricted)
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  2. 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 Journals, vol. 23(3), pages 461-476, September. [Downloadable!] (restricted)
  3. 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.
  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. [Downloadable!] (restricted)
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  5. Veugelers, Reinhilde, 1991. "Locational Determinants and Ranking of Host Countries: An Empirical Assessment," Kyklos, Blackwell Publishing, vol. 44(3), pages 363-82.
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  1. Rene Belderbos & Jianglei Zou, 2005. "Divesture of Foreign Manufacturing Affiliates: Country Platforms, Multinational Plant Networks, and Foreign Investor Agglomeration," Hi-Stat Discussion Paper Series d04-72, Institute of Economic Research, Hitotsubashi University. [Downloadable!]
  2. Ele Reiljan, 2006. "The role of entrepreneurial actions in the de-internationalization of Estonian enterprises: entrepreneurs’ perceptions," University of Tartu - Faculty of Economics and Business Administration, in: Entrepreneurship in Estonia: policies, practices, education and research, volume 28, chapter 7, pages 139-153 Faculty of Economics and Business Administration, University of Tartu (Estonia). [Downloadable!]
  3. Moniz, António & Gomes, Cláudia, 2002. "Impactos sociais do desinvestimento
    [Social Impacts of divestment]    ," MPRA Paper 5882, University Library of Munich, Germany, revised Sep 2002. [Downloadable!]
  4. Jan Hendrik Fisch, 2008. "Real call options to enlarge foreign subsidiaries – The moderating effect of irreversibility on the influence of economic volatility and political instability on subsequent FDI," Diskussionsreihe "Global Business Management" 2, University of Augsburg, competence center for global business management. [Downloadable!]
  5. Isabelle De Voldere & Leo Sleuwaegen & An Van Pelt & Reinhilde Veugelers, 2004. "Corporate structure of leading firms in Europe: does country origin still matter?," Vlerick Leuven Gent Management School Working Paper Series 2004-12, Vlerick Leuven Gent Management School. [Downloadable!]
  6. Moniz, António & Gomes, Cláudia, 2003. "Impacto do desinvestimento no mercado local de emprego: o caso de uma unidade da indústria metalomecânica
    [Impact of divestment on the local employment market: a case of the metal industry]    ," MPRA Paper 6862, University Library of Munich, Germany, revised Dec 2003. [Downloadable!]
  7. Narula,Rajneesh, 2003. "Globalisation and trends in international R&D alliances," Research Memoranda 001, Maastricht : MERIT, Maastricht Economic Research Institute on Innovation and Technology. [Downloadable!]
  8. Matthyssens,Paul & Pauwels,Pieter, 2002. "The Dynamics of International Market Withdrawal," Research Memoranda 048, Maastricht : METEOR, Maastricht Research School of Economics of Technology and Organization. [Downloadable!]
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