Do in-network ties help in lowering subsidiary divestment rates under environmental challenges?

This study examines the relationship between the in-network ties of a foreign subsidiary and its longevity in the face of environmental challenges in its host country. It specifically examines whether in-network trade and human ties can help reduce divestment rates under unfavorable and uncertain host market conditions. Empirical tests on a large sample of Korean foreign manufacturing subsidiaries reveal that the positive effect of unfavorable market demand on subsidiary divestment is negatively moderated by exchange rate uncertainty in its host market. Further, the effect of uncertainty on divestment is weakened when subsidiaries have stronger in-network trade ties or expatriate board members. This study contributes to the foreign divestment literature by examining how in-network connections and board-level support influence the longevity of foreign subsidiaries in hostile macro-economic contexts.