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Understanding foreign divestment: the impacts of economic and political friction
journal contribution
posted on 2023-06-10, 06:14 authored by Ha NguyenHa Nguyen, Jorma Larimo, Pervez GhauriPast research on foreign divestment has recognized the impact of economic and political differences1. However, the prior findings remain equivocal. We adopt the Positive Organizational Scholarship perspective to provide more contextualized insights into the effects of economic and political differences on foreign divestment. Specifically, we consider the juxtaposition of national differences and levels of firm interaction with the different contexts. Thus, we develop the concept of friction to assess levels of economic and political differences. We further argue that economic friction will have a curvilinear (U-shaped) effect on foreign divestment, whereas political friction will produce a monotonic (positive) effect. Moreover, we introduce ownership level as a moderator into the main hypotheses. Drawing on data from 2400 foreign subsidiaries of 310 Finnish multinational enterprises, from 1970–2010, we provide support for our main hypotheses, although the moderating effect of ownership levels is not supported. We further compare the effects of differences measured by friction with those measured by distance. Accordingly, our research highlights the importance of detecting specific conditions for the investigation of the impact of economic and political differences in the foreign divestment literature.
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Publication status
- Published
File Version
- Published version
Journal
Journal of Business ResearchISSN
0148-2963Publisher
ElsevierExternal DOI
Volume
139Page range
675-691Department affiliated with
- Strategy and Marketing Publications
Full text available
- Yes
Peer reviewed?
- Yes
Legacy Posted Date
2023-02-15First Open Access (FOA) Date
2023-02-15First Compliant Deposit (FCD) Date
2023-02-15Usage metrics
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