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The role of experience in FDI location choice: endogenous risk, exogenous risk, and high-level government visits
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posted on 2023-06-09, 02:55 authored by Peter J Buckley, Liang Chen, L Jeremy Clegg, Hinrich VossFDI 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.
History
Publication status
- Published
File Version
- Accepted version
Presentation Type
- paper
Event name
Academy of International Business (AIB) 2016 Annual MeetingEvent location
New OrleansEvent type
conferenceEvent date
27-30 Jun 2016Department affiliated with
- Business and Management Publications
Full text available
- No
Peer reviewed?
- Yes
Legacy Posted Date
2016-09-15First Compliant Deposit (FCD) Date
2016-09-15Usage metrics
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