The role of experience in FDI location choice: endogenous risk, exogenous risk, and high-level government visits

Buckley, Peter J, Chen, Liang, Clegg, L Jeremy and Voss, Hinrich (2016) The role of experience in FDI location choice: endogenous risk, exogenous risk, and high-level government visits. In: Academy of International Business (AIB) 2016 Annual Meeting, 27-30 Jun 2016, New Orleans.

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Abstract

FDI literature has presented consistent evidence that firm experience plays a promoting role in foreign entry decisions. This conclusion, however, is contested by recent research. We revisit the experience-as-learning argument in location choice in three respects. First, we examine the boundary of experiential learning in mitigating political risks, and argue that the established learning mechanism only applies to endogenous risk, but not exogenous risk. Second, we reveal unobserved heterogeneity emanating from the process of learning, and posit that there are residual variations in firms’ responses to endogenous risk after the effect of experience is accounted for. Third, we theorize government visit as signaling external assurance about the investment location to potential investors, and discuss how experiential learning discounts this signaling effect. Our fixed effects and random parameter analyses of a sample of Chinese manufacturing multinationals support the hypotheses and shed new light on FDI location choice.

Item Type: Conference or Workshop Item (Paper)
Schools and Departments: School of Business, Management and Economics > Business and Management
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Depositing User: Liang Chen
Date Deposited: 15 Sep 2016 14:53
Last Modified: 15 Sep 2016 14:53
URI: http://sro.sussex.ac.uk/id/eprint/63359

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