IDEAS home Printed from https://ideas.repec.org/a/eee/iburev/v34y2025i5s0969593125000976.html

International relations and foreign divestment of multinational enterprises

Author

Listed:
  • Wu, Sihong
  • Fan, Di
  • Su, Yiyi

Abstract

Due to the growing complexity of international relations over the past decade, multinational enterprises (MNEs) have embarked on a new era characterized by novel challenges and opportunities. The reversal trend of internationalization has evoked a fast-growing research interest in MNEs’ foreign divestment decisions. However, scant research has integrated the changing international relations in order to examine their propensity to divest. Drawing on insights from the international relations perspective, this study explores the impact of host-country national sentiment (characterized by the prioritization of national interests) and home-host country diplomatic relations (centered on fostering bilateral interests) on foreign divestment. Our findings show that MNEs’ propensity to divest increases when host-country national sentiment becomes stronger but decreases when home-host countries have strengthened diplomatic engagement. These relationships are moderated by MNEs’ ownership strategy. Overall, this study enriches the literature and offers new insights into de-globalization and the research of unilateral and bilateral relations in international business.

Suggested Citation

  • Wu, Sihong & Fan, Di & Su, Yiyi, 2025. "International relations and foreign divestment of multinational enterprises," International Business Review, Elsevier, vol. 34(5).
    • Handle: RePEc:eee:iburev:v:34:y:2025:i:5:s0969593125000976
    DOI: 10.1016/j.ibusrev.2025.102484
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0969593125000976
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.ibusrev.2025.102484?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to

    for a different version of it.

    References listed on IDEAS

    as
    1. Han Jiang & Albert A. Cannella Jr. & Jun Xia & Matthew Semadeni, 2017. "Choose to Fight or Choose to Flee? A Network Embeddedness Perspective of Executive Ship Jumping in Declining Firms," Strategic Management Journal, Wiley Blackwell, vol. 38(10), pages 2061-2079, October.
    2. Han, Xia & Lukoianove, Tatiana & Zhao, Shasha & Liu, Xiaohui, 2024. "International relations in international business research: A review and research agenda," Journal of Business Research, Elsevier, vol. 174(C).
    3. Heather Berry & Mauro F Guillén & Nan Zhou, 2010. "An institutional approach to cross-national distance," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 41(9), pages 1460-1480, December.
    4. Lammertjan Dam & Bert Scholtens, 2013. "Ownership Concentration and CSR Policy of European Multinational Enterprises," Journal of Business Ethics, Springer, vol. 118(1), pages 117-126, November.
    5. Mobbs, Shawn & Raheja, Charu G., 2012. "Internal managerial promotions: Insider incentives and CEO succession," Journal of Corporate Finance, Elsevier, vol. 18(5), pages 1337-1353.
    6. Ilgaz Arikan & Asli M. Arikan & Oded Shenkar, 2022. "Revisiting emerging market multinational enterprise views: The Goldilocks story restated," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 53(4), pages 781-802, June.
    7. Nguyen, Ha Thi Thu & Larimo, Jorma & Ghauri, Pervez, 2022. "Understanding foreign divestment: The impacts of economic and political friction," Journal of Business Research, Elsevier, vol. 139(C), pages 675-691.
    8. Ashish Arora & Andrea Fosfuri, 2000. "Wholly Owned Subsidiary Versus Technology Licensing in the Worldwide Chemical Industry," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 31(4), pages 555-572, December.
    9. Lance Eliot Brouthers & Victor B Marshall & Dawn L Keig, 2016. "Solving the single-country sample problem in cultural distance studies," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 47(4), pages 471-479, May.
    10. Leonie Huddy & Nadia Khatib, 2007. "American Patriotism, National Identity, and Political Involvement," American Journal of Political Science, John Wiley & Sons, vol. 51(1), pages 63-77, January.
    11. Marvin B. Lieberman & Gwendolyn K. Lee & Timothy B. Folta, 2017. "Entry, exit, and the potential for resource redeployment," Strategic Management Journal, Wiley Blackwell, vol. 38(3), pages 526-544, March.
    12. Fetscherin, Marc & Voss, Hinrich & Gugler, Philippe, 2010. "30 Years of foreign direct investment to China: An interdisciplinary literature review," International Business Review, Elsevier, vol. 19(3), pages 235-246, June.
    13. Wu, Sihong & Chirico, Francesco & Fan, Di & Ding, Jiayan & Su, Yiyi, 2024. "Foreign market exit in family firms: Do historical military and cultural frictions matter?," Journal of World Business, Elsevier, vol. 59(1).
    14. 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.
    15. Jing Li & Klaus E Meyer & Hua Zhang & Yuan Ding, 2018. "Diplomatic and corporate networks: Bridges to foreign locations," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 49(6), pages 659-683, August.
    16. Arturs Kalnins, 2018. "Multicollinearity: How common factors cause Type 1 errors in multivariate regression," Strategic Management Journal, Wiley Blackwell, vol. 39(8), pages 2362-2385, August.
    17. Mazouz, Khelifa & Wood, Geoffrey & Yin, Shuxing & Zhang, Mao, 2021. "Comprehending the outward FDI from Latin America and OCED: A comparative perspective," International Business Review, Elsevier, vol. 30(5).
    18. Wu, Sihong & Fan, Di, 2023. "Taking two to tango: A comparative nationalism view of cross-border acquisitions," International Business Review, Elsevier, vol. 32(3).
    19. Li Dai & Lorraine Eden & Paul W Beamish, 2013. "Place, space, and geographical exposure: Foreign subsidiary survival in conflict zones," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 44(6), pages 554-578, August.
    20. Chen, Gongmeng & Firth, Michael & Xu, Liping, 2009. "Does the type of ownership control matter? Evidence from China's listed companies," Journal of Banking & Finance, Elsevier, vol. 33(1), pages 171-181, January.
    21. Xiaohuan Lan & Ben G. Li, 2015. "The Economics of Nationalism," American Economic Journal: Economic Policy, American Economic Association, vol. 7(2), pages 294-325, May.
    22. Seung Ho Park & Yadong Luo, 2001. "Guanxi and organizational dynamics: organizational networking in Chinese firms," Strategic Management Journal, Wiley Blackwell, vol. 22(5), pages 455-477, May.
    23. Katarina Blomkvist & Rian Drogendijk, 2013. "The Impact of Psychic Distance on Chinese Outward Foreign Direct Investments," Management International Review, Springer, vol. 53(5), pages 659-686, October.
    24. José Mata & Ernesto Freitas, 2012. "Foreignness and exit over the life cycle of firms," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 43(7), pages 615-630, September.
    25. Cuervo-Cazurra, Alvaro & Li, Cheng, 2021. "State ownership and internationalization: The advantage and disadvantage of stateness," Journal of World Business, Elsevier, vol. 56(1).
    26. Fan, Di & Su, Yiyi & Peng, Mike W., 2024. "A configurational approach to political risks and institutional logics," Journal of International Management, Elsevier, vol. 30(2).
    27. Blanc-Brude, Frédéric & Cookson, Graham & Piesse, Jenifer & Strange, Roger, 2014. "The FDI location decision: Distance and the effects of spatial dependence," International Business Review, Elsevier, vol. 23(4), pages 797-810.
    28. Doh, Jonathan P. & Dahan, Nicolas M. & Casario, Michelle, 2022. "MNEs and the practice of international business diplomacy," International Business Review, Elsevier, vol. 31(1).
    29. George Balabanis & Adamantios Diamantopoulos & Rene Dentiste Mueller & T C Melewar, 2001. "The Impact of Nationalism, Patriotism and Internationalism on Consumer Ethnocentric Tendencies," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 32(1), pages 157-175, March.
    30. George W. Gallinger, 1982. "Corporate vulnerability to cash tender offers," Strategic Management Journal, Wiley Blackwell, vol. 3(3), pages 179-196, July.
    31. Buchnea, Emily & Elsahn, Ziad, 2022. "Historical social network analysis: Advancing new directions for international business research," International Business Review, Elsevier, vol. 31(5).
    32. Witt, Michael A. & Li, Peter Ping & Välikangas, Liisa & Lewin, Arie Y., 2021. "De-globalization and Decoupling: Game Changing Consequences?," Management and Organization Review, Cambridge University Press, vol. 17(1), pages 6-15, February.
    33. Deng, Lu & Jiang, Ping & Li, Sifei & Liao, Mingqing, 2020. "Government intervention and firm investment," Journal of Corporate Finance, Elsevier, vol. 63(C).
    34. Michael A. Sartor & Paul W. Beamish, 2020. "Integration-oriented strategies, host market corruption and the likelihood of foreign subsidiary exit from emerging markets," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 51(3), pages 414-431, April.
    35. Elaine Hutson & Simon Stevenson, 2010. "Openness, hedging incentives and foreign exchange exposure: A firm-level multi-country study," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 41(1), pages 105-122, January.
    36. Meyer, Klaus E. & Tse, Caleb H., 2025. "Organizational legitimacy as a core concept for theorizing on business in emerging economies," International Business Review, Elsevier, vol. 34(4).
    37. Clegg, Jeremy & Lin, Hsin Mei & Voss, Hinrich & Yen, I-Fan & Shih, Yi Tien, 2016. "The OFDI patterns and firm performance of Chinese firms: The moderating effects of multinationality strategy and external factors," International Business Review, Elsevier, vol. 25(4), pages 971-985.
    38. Jonas F Puck & Dirk Holtbrügge & Alexander T Mohr, 2009. "Beyond entry mode choice: Explaining the conversion of joint ventures into wholly owned subsidiaries in the People's Republic of China," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 40(3), pages 388-404, April.
    39. Zhenzhen Xie & Jiatao Li, 2018. "Exporting and innovating among emerging market firms: The moderating role of institutional development," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 49(2), pages 222-245, February.
    40. Surdu, Irina & Mellahi, Kamel & Glaister, Keith W. & Nardella, Giulio, 2018. "Why wait? Organizational learning, institutional quality and the speed of foreign market re-entry after initial entry and exit," Journal of World Business, Elsevier, vol. 53(6), pages 911-929.
    41. Kafouros, Mario & Cavusgil, S. Tamer & Devinney, Timothy M. & Ganotakis, Panagiotis & Fainshmidt, Stav, 2022. "Cycles of de-internationalization and re-internationalization: Towards an integrative framework," Journal of World Business, Elsevier, vol. 57(1).
    42. Matolcsy, Zoltan & Wakefield, James, 2017. "Multinational headquarter control of wholly owned foreign subsidiaries," The British Accounting Review, Elsevier, vol. 49(3), pages 275-293.
    43. Michael A. Witt, 2019. "De-globalization: Theories, predictions, and opportunities for international business research," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 50(7), pages 1053-1077, September.
    44. Shujing Li & Jiaping Qiu & Chi Wan, 2011. "Corporate globalization and bank lending," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 42(8), pages 1016-1042, October.
    45. Shyamala Sethuram & Ajai Gaur, 2024. "Foreign divestment: the missing piece in international business scholarship," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 55(8), pages 1038-1047, October.
    46. Alaydi, Sharif & Buck, Trevor & Tang, Yee Kwan, 2021. "Strategic responses to extreme institutional challenges: An MNE case study in the Palestinian mobile phone sector," International Business Review, Elsevier, vol. 30(3).
    47. Shen, Lu & Zhang, Chuang & Teng, Wenbo & Du, Nan, 2022. "How do business and political Networking shape overseas dispute resolution for state-owned enterprise from emerging economies," International Business Review, Elsevier, vol. 31(1).
    48. Alvaro Cuervo-Cazurra & Anna Grosman & William L. Megginson, 2023. "A review of the internationalization of state-owned firms and sovereign wealth funds: Governments’ nonbusiness objectives and discreet power," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 54(1), pages 78-106, February.
    49. Zhang, Jianhong & He, Xinming, 2014. "Economic nationalism and foreign acquisition completion: The case of China," International Business Review, Elsevier, vol. 23(1), pages 212-227.
    50. Holland, Kateryna, 2019. "Government investment in publicly traded firms," Journal of Corporate Finance, Elsevier, vol. 56(C), pages 319-342.
    51. Chengguang Li & Ilgaz Arikan & Oded Shenkar & Asli Arikan, 2020. "The impact of country-dyadic military conflicts on market reaction to cross-border acquisitions," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 51(3), pages 299-325, April.
    52. Douglas A. Schuler & Wei Shi & Robert E. Hoskisson & Tao Chen, 2017. "Windfalls of emperors' sojourns: Stock market reactions to Chinese firms hosting high-ranking government officials," Strategic Management Journal, Wiley Blackwell, vol. 38(8), pages 1668-1687, August.
    53. Fu, Xialoan & Hou, Jun & Sanfilippo, Marco, 2017. "Highly skilled returnees and the internationalization of EMNEs: Firm level evidence from China," International Business Review, Elsevier, vol. 26(3), pages 579-591.
    54. Steven Globerman & Daniel Shapiro, 2003. "Governance infrastructure and US foreign direct investment," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 34(1), pages 19-39, January.
    55. Powell, Robert, 1991. "Absolute and Relative Gains in International Relations Theory," American Political Science Review, Cambridge University Press, vol. 85(4), pages 1303-1320, December.
    56. Fearon, James D, 2003. "Ethnic and Cultural Diversity by Country," Journal of Economic Growth, Springer, vol. 8(2), pages 195-222, June.
    57. David Godsell & Ugur Lel & Darius Miller, 2023. "U.S. national security and de-globalization," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 54(8), pages 1471-1494, October.
    58. Sihong Wu & Di Fan & Liang Chen, 2022. "Revisiting the Internationalization-Performance Relationship: A Twenty-Year Meta-Analysis of Emerging Market Multinationals," Management International Review, Springer, vol. 62(2), pages 203-243, April.
    59. Cheng-Li Huang & Fan-Hua Kung, 2010. "Drivers of Environmental Disclosure and Stakeholder Expectation: Evidence from Taiwan," Journal of Business Ethics, Springer, vol. 96(3), pages 435-451, October.
    60. Sumon Kumar Bhaumik & Saul Estrin & Rajneesh Narula, 2024. "Integrating host-country political heterogeneity into MNE–state bargaining: insights from international political economy," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 55(2), pages 157-171, March.
    61. Kratochwil, Friedrich & Ruggie, John Gerard, 1986. "International organization: a state of the art on an art of the state," International Organization, Cambridge University Press, vol. 40(4), pages 753-775, October.
    62. Jiangyong Lu & Xiaohui Liu & Mike Wright & Igor Filatotchev, 2014. "International experience and FDI location choices of Chinese firms: The moderating effects of home country government support and host country institutions," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 45(4), pages 428-449, May.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Wu, Sihong & Chirico, Francesco & Fan, Di & Ding, Jiayan & Su, Yiyi, 2024. "Foreign market exit in family firms: Do historical military and cultural frictions matter?," Journal of World Business, Elsevier, vol. 59(1).
    2. Fan, Di & Ding, Jiayan & Wu, Sihong & Su, Yiyi, 2025. "Firewalls or frontlines: Geopolitical tensions and multinationals' digital technology upgrading," Technological Forecasting and Social Change, Elsevier, vol. 216(C).
    3. Xu, Kai & Hitt, Michael A. & Brock, David & Pisano, Vincenzo & Huang, Lulu S.R., 2021. "Country institutional environments and international strategy: A review and analysis of the research," Journal of International Management, Elsevier, vol. 27(1).
    4. Danchi Tan & Weichieh Su & Joseph T. Mahoney & Yasemin Kor, 2020. "A review of research on the growth of multinational enterprises: A Penrosean lens," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 51(4), pages 498-537, June.
    5. Sidney Michael Pillich, 2025. "De-internationalization of cross-border investments from a de-globalization perspective: a systematic literature review and structuring of the field," Management Review Quarterly, Springer, vol. 75(2), pages 1419-1494, June.
    6. Sihong Wu & Di Fan & Liang Chen, 2022. "Revisiting the Internationalization-Performance Relationship: A Twenty-Year Meta-Analysis of Emerging Market Multinationals," Management International Review, Springer, vol. 62(2), pages 203-243, April.
    7. Huang, Dongdong & Tsui-Auch, Lai Si & Dieleman, Marleen & Gomulya, David, 2024. "Politically connected EMNCs in a (de)globalising world: A review and future research directions," International Business Review, Elsevier, vol. 33(3).
    8. Zheng, Weiting & Zheng, Yaqin & Yi, Jingtao & Shaheer, Noman & Li, Sali, 2024. "Context matters: The signaling role of foreign bidders’ reputation in cross-border acquisition contests," Journal of World Business, Elsevier, vol. 59(4).
    9. Han, Xia & Lukoianove, Tatiana & Zhao, Shasha & Liu, Xiaohui, 2024. "International relations in international business research: A review and research agenda," Journal of Business Research, Elsevier, vol. 174(C).
    10. Yuanyuan Huang & Lu Shen & Chuang Zhang, 2022. "Home-country government support, the belt and road initiative, and the foreign performance of Chinese state-owned subsidiaries," Asia Pacific Journal of Management, Springer, vol. 39(3), pages 1023-1049, September.
    11. Pan, Xin & Chen, Xuanjin & Wang, Hao, 2024. "Beyond economic considerations: The role of socioemotional wealth in family firm foreign exit decisions," International Business Review, Elsevier, vol. 33(4).
    12. Ren, Monica & Gao, Hongzhi, 2023. "Chinese State-Owned Multinationals' (SOMNEs) Subsidiary nonmarket strategies in Selective De-globalization: An integrated perspective of co-evolution theory and the yin-yang frame," Journal of International Management, Elsevier, vol. 29(6).
    13. Ameyaw, Abdul-Kadir & Panibratov, Andrei & Ameyaw, Ahmed Sadat, 2023. "Foreign divestment from emerging markets: A systematic literature review, integrative framework, and research agenda," European Management Journal, Elsevier, vol. 41(6), pages 1134-1152.
    14. Kano, Hirokazu & Iriyama, Akie, 2023. "Host country corruption and MNE location choice: The view of institutional pluralism," Journal of International Management, Elsevier, vol. 29(3).
    15. Wu, Sihong & Fan, Di, 2023. "Taking two to tango: A comparative nationalism view of cross-border acquisitions," International Business Review, Elsevier, vol. 32(3).
    16. Zhenkuo Ding & Man Hu & Sheng Huang, 2023. "Diplomatic Relations and Firm Internationalization Speed: The Moderating Roles of Trade Openness and Firm Ownership," Management International Review, Springer, vol. 63(6), pages 911-941, December.
    17. Nguyen, Ha & Strange, Roger, 2025. "Do global dynamic managerial capabilities affect MNEs' divestments of their overseas subsidiaries?," Journal of International Management, Elsevier, vol. 31(2).
    18. Jiang, Jiangang & Zhang, Jianhong, 2024. "National security review and ownership participation in cross-border acquisitions," International Business Review, Elsevier, vol. 33(6).
    19. Yu, Jiang & Fang, Yuanxin & Bai, Yutong & Chen, Feng, 2025. "Building resilience amidst geopolitical tensions: The case of U.S. MNE subsidiaries in China," Journal of International Management, Elsevier, vol. 31(4).
    20. Tang, Ryan W., 2023. "Institutional unpredictability and foreign exit−reentry dynamics: The moderating role of foreign ownership," Journal of World Business, Elsevier, vol. 58(2).

    More about this item

    Keywords

    ;
    ;
    ;
    ;
    ;
    ;

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:iburev:v:34:y:2025:i:5:s0969593125000976. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/wps/find/journaldescription.cws_home/133/description#description .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.