Experience and FDI risk-taking: a microfoundational reconceptualization

Buckley, Peter J, Chen, Liang, Clegg, L Jeremy and Voss, Hinrich (2016) Experience and FDI risk-taking: a microfoundational reconceptualization. Journal of International Management, 22 (2). pp. 131-146. ISSN 1075-4253

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Studies of how firms respond to host country risk have assigned explanatory primacy to organizational capability and managerial risk preference. The organization-level account is built on the premise that capability is a prerequisite for risk-taking while the individual-level account focuses on the managers’ intrinsic behavioral attitude. Without integrating one with the other, the former is open to many alternative explanations while the latter remains only a source of heterogeneity. We propose that employing the microfoundations approach can address the limitations of each account and yield a fuller understanding of FDI risk-taking. Drawing upon behavioral decision theory and the concept of risk propensity, we describe the lower-level mechanisms that generate the empirical regularity between firm experience and risk-taking, which has been attributed to the macro-level capabilities paradigm. We finalize the framework with an account as to how individual-level mechanisms can be incorporated into the context of organizational strategic decision-making.

Item Type: Article
Keywords: country risk, risk propensity, microfoundations, behavioral decision-making, experience
Schools and Departments: School of Business, Management and Economics > Business and Management
Subjects: H Social Sciences
Depositing User: Liang Chen
Date Deposited: 25 Feb 2016 09:32
Last Modified: 07 Mar 2017 07:08
URI: http://sro.sussex.ac.uk/id/eprint/59753

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