Determinants of multinationals’ foreign divestment strategies: Evidence from Russia

Unprecedented economic sanctions are among key factors behind investment strategies employed by multinational corporations (MNCs) for doing business in Russia. Challenges faced by the host economy and pressure from home countries are pushing international investors towards alternative strategies of equity participation. Despite the mass exit of Western busi nesses in 2022, the dilemma of leaving or staying in the Russian market is still acute for many MNCs. The purpose of the article is to identify factors affecting foreign investment companies’ intention to continue or curtail their operations in the sanctioned Russian economy and the choice among strategic alternatives as to exit or keep their business in the country. Political risk theory, economic opportunism theory and the emerging concept of foreign divestment constitute the methodological basis of the study. Econometric modelling of MNCs’ decisions in the host economy is carried out using binary and multiple choice models. The em pirical evidence is comprised of data for 2022 on corporate decisions of 1,359 subsidiaries located in Russia. The research results showed that, despite political pressure, economic success of Russian business units drives foreign investors to continue operat ing in the sanctioned economy. Growing revenues and share of the Russian branch in the MNC consolidated income raise the likelihood that the subsidiary will remain in the Russian market or take a wait-and-see position. We have found that the crowd effect and the snowball effect do not increase, but decrease the likelihood of foreign divestment from Russia, as does the different perception of corruption between Russia and the MNC’s home country. Our findings contribute to the understanding of global supply chain sustainability, strategies for attracting foreign direct investment and finding new business partners for Russian com panies in the current geopolitical situation.