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Multinational Firms and Plant Divestiture

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  • Norback, Pehr-Johan
  • Tekin-Koru, Ayca
  • Waldkirch, Andreas

Abstract

Multinational enterprises frequently start, acquire, close and divest affiliates. There is a large literature on restructuring, which focuses on start-ups and acquisitions. The empirical literature on plant survival usually provides evidence from a single country. In contrast, this paper uses detailed survey data of Swedish multinationals to examine the characteristics that result in plant divestiture at the affiliate, firm, industry, country and regional level. We provide propositions drawn on a straightforward model from Berg et al (2012) in which the primary motive to divest an affiliate is to finance other investments in the network of the MNC. In line with conclusions from our model, we find that larger affiliates are more likely to be divested and these affiliates are small relative to the other operations of the firm in the same country or region. We also find that divestiture begets divestiture, but acquisition does not, thus casting doubt on the notion of footloose multinationals. Several firm, industry and country characteristics also matter.

Suggested Citation

  • Norback, Pehr-Johan & Tekin-Koru, Ayca & Waldkirch, Andreas, 2013. "Multinational Firms and Plant Divestiture," MPRA Paper 45957, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:45957
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    References listed on IDEAS

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    Cited by:

    1. Laura Resmini & Giuseppe Vittucci, 2016. "Home country bias in divestment decisions of multinational corporations in the EU," ERSA conference papers ersa16p220, European Regional Science Association.
    2. repec:spr:weltar:v:153:y:2017:i:3:d:10.1007_s10290-017-0281-5 is not listed on IDEAS

    More about this item

    Keywords

    Foreign Direct Investment; Multinationals; Divestiture;

    JEL classification:

    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business

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