Risk propensity in the foreign direct investment location decision of emerging multinationals

Buckley, Peter J, Chen, Liang, Clegg, L Jeremy and Voss, Hinrich (2018) Risk propensity in the foreign direct investment location decision of emerging multinationals. Journal of International Business Studies, 49 (2). pp. 153-171. ISSN 0047-2506

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Abstract

A distinguishing feature of emerging economy multinationals is their apparent tolerance for host country institutional risk. Employing behavioral decision theory and quasi-experimental data, we find that managers’ domestic experience satisfaction increases their relative risk propensity regarding controllable risk (legally protectable loss), but decreases their tendency to accept non-controllable risk (e.g., political instability). In contrast, firms’ potential slack reduces relative risk propensity regarding controllable risk, yet amplifies the tendency to take non-controllable risk. We suggest that these counterbalancing effects might help explain observation that risk-taking in FDI location decisions is influenced by firm experience and context. The study provides a new understanding of why firms exhibit heterogeneous responses to host country risks, and the varying effects of institutions.

Item Type: Article
Schools and Departments: School of Business, Management and Economics > Business and Management
Research Centres and Groups: International Business
Depositing User: Liang Chen
Date Deposited: 16 Oct 2017 08:55
Last Modified: 22 Feb 2018 14:50
URI: http://sro.sussex.ac.uk/id/eprint/70531

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