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Experience and FDI Risk-taking: A Microfoundational Reconceptualization

Author

Listed:
  • Buckley, Peter J.
  • Chen, Liang
  • Clegg, L. Jeremy
  • Voss, Hinrich

Abstract

Studies of how firms respond to host country risk have assigned explanatory primacy to organizational capability and managerial risk preference. The organization-level account is built on the premise that capability is a prerequisite for risk-taking while the individual-level account focuses on the managers' intrinsic behavioral attitude. Without integrating one with the other, the former is open to many alternative explanations while the latter remains only a source of heterogeneity. We propose that employing the microfoundations approach can address the limitations of each account and yield a fuller understanding of FDI risk-taking. Drawing upon behavioral decision theory and the concept of risk propensity, we describe the lower-level mechanisms that generate the empirical regularity between firm experience and risk-taking, which has been attributed to the macro-level capabilities paradigm. We finalize the framework with an account as to how individual-level mechanisms can be incorporated into the context of organizational strategic decision-making.

Suggested Citation

  • Buckley, Peter J. & Chen, Liang & Clegg, L. Jeremy & Voss, Hinrich, 2016. "Experience and FDI Risk-taking: A Microfoundational Reconceptualization," Journal of International Management, Elsevier, vol. 22(2), pages 131-146.
    • Handle: RePEc:eee:intman:v:22:y:2016:i:2:p:131-146
    DOI: 10.1016/j.intman.2016.02.001
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