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Foreignness and exit over the life cycle of firms

Author

Listed:
  • José Mata

    (Nova School of Business and Economics, Lisboa, Portugal)

  • Ernesto Freitas

    (Nova School of Business and Economics, Lisboa, Portugal)

Abstract

Received wisdom indicates that, owing to a liability of foreignness, foreign firms exit with greater likelihood than do comparable domestic firms, and that the difference attenuates as firms age and overcome the liability. We posit that foreign firms are also intrinsically more volatile and footloose than domestic ones, and that this leads to an increasing divergence between the exit rates of foreign and domestic firms. Empirically, we find that the difference between exit rates of foreign firms and domestic firms increases with age, as exit of foreign firms increases with age while that of purely domestic firms decreases. Exit rates of domestic-based multinationals do not change significantly with age; they are between those of foreign and purely domestic firms, but are closer to the latter. This suggests that the footlooseness observed for foreign firms is due to foreignness more than to multinationality.

Suggested Citation

  • 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.
  • Handle: RePEc:pal:jintbs:v:43:y:2012:i:7:p:615-630
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    3. Varum, Celeste & Rocha, Vera Catarina & Valente da Silva, Hélder, 2014. "Economic slowdowns, hazard rates and foreign ownership," International Business Review, Elsevier, vol. 23(4), pages 761-773.
    4. repec:spr:manint:v:57:y:2017:i:5:d:10.1007_s11575-017-0312-4 is not listed on IDEAS
    5. Vithessonthi, Chaiporn, 2017. "Capital investment and internationalization," Journal of Economics and Business, Elsevier, vol. 90(C), pages 31-48.
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    7. repec:pal:jintbs:v:48:y:2017:i:7:d:10.1057_s41267-017-0092-x is not listed on IDEAS
    8. Bournakis, Ioannis & Papanastassiou, Marina & Pitelis, Christos, 2015. "Regional Growth and Convergence in the UK: the Role of MNE Subsidiaries and Domestic Firms," MPRA Paper 68090, University Library of Munich, Germany.
    9. Jesper Edman, 2016. "Reconciling the advantages and liabilities of foreignness: Towards an identity-based framework," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 47(6), pages 674-694, August.
    10. repec:pal:jintbs:v:48:y:2017:i:8:d:10.1057_s41267-017-0104-x is not listed on IDEAS
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    16. Mata, José & Portugal, Pedro, 2015. "The termination of international joint ventures: Closure and acquisition by domestic and foreign partners," International Business Review, Elsevier, vol. 24(4), pages 677-689.
    17. repec:bla:stratm:v:38:y:2017:i:7:p:1478-1498 is not listed on IDEAS

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