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Closure and Divestiture By Foreign Entrants: The Impact of Entry and Post-Entry Strategies

  • José Mata
  • Pedro Portugal

We analyze the longevity of foreign entrants explicitly considering two possible ways of exit: firm closure and capital divestiture. We find that entry and post-entry strategies affect the longevity of firms and of foreign equity holdings, but in different manners. While the ownership arrangements and organizational structure affect the likelihood of divestment, they exert no significant effect upon closure. The entry mode exerts opposite effects on the two modes of exit, greenfield entrants being more likely to shutdown, but less likely to be divested. Only human capital affects closure and divestment in the same manner. Firms with large endowments of human capital are less likely to exit, irrespective of the exit mode considered.

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Paper provided by Banco de Portugal, Economics and Research Department in its series Working Papers with number w199906.

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Date of creation: 1999
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Handle: RePEc:ptu:wpaper:w199906
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  1. Dunne, Timothy & Roberts, Mark J & Samuelson, Larry, 1989. "The Growth and Failure of U.S. Manufacturing Plants," The Quarterly Journal of Economics, MIT Press, vol. 104(4), pages 671-98, November.
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  7. Evans, David S & Jovanovic, Boyan, 1989. "An Estimated Model of Entrepreneurial Choice under Liquidity Constraints," Journal of Political Economy, University of Chicago Press, vol. 97(4), pages 808-27, August.
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  9. Kogut, Bruce, 1989. "The Stability of Joint Ventures: Reciprocity and Competitive Rivalry," Journal of Industrial Economics, Wiley Blackwell, vol. 38(2), pages 183-98, December.
  10. Guimaraes, Paulo & Mata, José & Portugal, Pedro, 1995. "The Survival of New Plants: Start-up Conditions and Post-entry Evolution," CEPR Discussion Papers 1203, C.E.P.R. Discussion Papers.
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