Why do multinational enterprises (MNEs) delay or avoid divesting foreign affiliates even when exit appears warranted? We argue that divestment is a visible strategic action that prompts renewed principal scrutiny of prior investment decisions and ongoing stewardship, increasing the evaluative exposure of the corporate management function. Drawing on agency theory, we examine how ownership commitment, headquarters involvement, and performance-based discretion shape divestment. Using longitudinal data on foreign affiliates in Korea (2007–2019), we find that ownership commitment and performance-based discretion reduce divestment likelihood, that restructuring weakens these effects, and that relational ownership moderates the effect of headquarters involvement. Divestment thus reflects governance and attribution processes, not merely economic considerations.

This paper examines the causes of foreign affiliate performance, exploring the importance of the relationships between affiliates and parents in explaining apparent performance differences. By making use of a large firm level database, linking firm level data to numerous sources of official country level data, we explore the importance of headquarters effects, affiliate level effects, and location effects in terms of firm performance. Further, we contrast the effects in terms of both productivity and profitability. Affiliate-level factors explain most of affiliate performance. There are parent-level influences on affiliate performance, but not from the parent's location. Our analysis provides insights into the interaction of parent (i.e. HQ) attributes with those of the foreign affiliate, as well as the locations of both HQ and affiliate, and thus provides insights into the complexity of these relationships.

There is a general assumption in the literature that due diligence is a vital ex ante step in alliance formation. However, the actual relationship between alliance performance and due diligence has not been empirically studied. Drawing on theoretical insights from information economics, we address this issue in international alliances, considering each party’s due diligence investigations. Demonstrating that due diligence is indeed beneficial for performance, we go a step further and show that this beneficial effect is negatively moderated where contextual factors affect the information environment. We find that both geographic distance which increases information asymmetries and partner-specific experience which decreases information asymmetries lessen the value generation potential of due diligence. This paper thus confirms the assumption in the literature and also introduces contextual limitations. This paper therefore helps address the cost–benefit scenario of due diligence.

Multinational enterprises (MNEs) are increasingly challenged by the strategic implications of economic sanctions, which are imposed in response to geopolitical instability, international conflict, and violations of international norms. In this paper, we propose that superior resources and capabilities enhance the ownership advantages of MNEs, enabling them to pursue foreign direct investment (FDI) in sanctioned locations. We also build on institutional theory to examine contextual conditions and find that effective home country institutions deter investment to sanctioned locations and decrease the magnitude of the moderating effect of firm resources and experience. Moreover, being in a sanctioned location leads firms to invest more to other sanctioned locations because of the resulting specific ownership advantages. We test our conjectures on a large panel dataset and find support for our arguments. In post hoc analysis, we also examine the impact of sanctions on locational choice, highlighting that they have a deterrent effect. Our results have important implications for managers and policy makers in terms of international management and institutional dynamics.

Divestments by foreign multinationals are an important phenomenon that is largely neglected in the literature. We use firm-level panel data from China to estimate the impact of such divestments on the performance of domestic firms in the local economy. To the best of our knowledge, there is no empirical study that has looked at these effects. Our results suggest that, overall, domestic firms may be able to benefit from divestments by foreign firms through spillovers. We find evidence suggesting that the positive overall effect for private firms is driven by the movement of workers from the divested firm to the local firm, as well as by a reduction in competition reducing crowding out. By contrast, local firms are negatively affected by the loss of technology transfer and customer-supplier relationships with foreign firms. While most effects are short-lived, the negative impact on technology transfer persists over time.

This paper delves into the pivotal role of institutions in facilitating knowledge spillovers, particularly in the context of multinational enterprises (MNEs) and knowledge transfer. While extant literature highlights the positive correlation between good institutional quality and knowledge transfer, this paper introduces a nuanced perspective. It argues for an inverted U-shaped relationship, suggesting that MNEs may exhibit reluctance in knowledge transfer to subsidiaries not only in environments with low institutional quality, as conventionally discussed, but also in those characterized by high institutional quality. In fact, there are beneficial implications of good institutions for domestic firms as well, enabling greater capacity to absorb knowledge and thereby emerge as competitors of MNEs. The paper demonstrates an inverted U-shaped relationship between spillovers, to capture knowledge transfer, and the quality of local institutions. This study provides valuable insights into the complex dynamics of knowledge spillovers, emphasizing the multifaceted influence of institutional environments on knowledge dissemination and economic development.

This paper examines the interplay of geopolitics, multinational enterprise (MNE) strategies, and host-country policies in shaping foreign direct investment (FDI) flows. We move beyond the traditional focus on MNE decisions by incorporating insights from international relations theory to analyze how geopolitical alignment influences MNE global strategies and host-country policy responses. We develop a framework that considers three main dimensions related to home and host countries: their political alignment, which affects their respective availability of outside options, and the technology gap between them and the political system in the host country. On this basis, we explore the dynamic interplay between international geopolitical agendas, MNE investment strategies, and local investment promotion agency (IPA) policy choices. Our analysis shows that while home–host geopolitical alignment can facilitate FDI and simplify policy choices, particularly in democracies, the absence of alignment necessitates a more nuanced IPA response. Our research indicates that IPA policies must consider geopolitical alignment, benefits distribution across various stakeholders, and the need to foster embeddedness and long-term engagement.

The relationship between inward investments and local firms' productivity is contingent on several contextual conditions that collectively define the ability of firms and regions to recognise, assimilate and commercially apply external knowledge. Yet the empirical literature has been unable to account efficiently for such multidimensional sources of heterogeneous externalities. We introduce a novel two-stage empirical methodology that allows accounting for a wide range of moderating circumstances. Relying on a sample of 11,000 UK firms over the period 2012-2018, we show that while the nature of places affects the potential externalities from multinational enterprises (MNEs), what matters more are firm-level characteristics. This has important implications for regional policy, particularly in understanding the drivers of inequality, both within and across regions.

Purpose The issue of motivation for foreign direct investment (FDI) is central to international business (IB) theory and empirical research. The most common starting point is Dunning’s four motives (4M) framework: market seeking, natural resource seeking, efficiency seeking and strategic asset seeking. This paper explores the genesis, development and application of the 4M framework and demonstrate how it has developed from an abstract typology and heuristic device unsupported by empirical evidence into a set of concrete behavioral assumptions with theoretical and methodological consequences for IB research. Design/methodology/approach The paper is mainly conceptual, based on relevant theoretical work on FDI motives, and partly methodological, concentrating on the importance of realism for behavioral assumptions in IB. Findings The authors demonstrate that the shift in the 4M framework from abstract typology to a set of concrete behavioral assumptions has important implications for the development of IB theory and methodology. A critical issue has largely been ignored: the role of realism in the assumptions on which theory and its empirical testing are based and the possible consequences of unrealism in key behavioral assumptions. The authors show that attempts to “fix” the problems inherent in the 4M framework will inevitably fail and suggest ways in which it is possible to inject more realism into behavioral assumptions underlying FDI motivation. Practical implications The authors demonstrate that the applicability of the 4M approach, for either firms or policymakers seeking to attract FDI and maximize the benefits from it, needs to be more clearly understood in the context of the particular decision. Social implications Many countries see the attraction of FDI as central to their plans for economic growth and indeed the propensity for industrial development and moving up the value chain. The understanding of FDI motive has, in recent years, been recognized as central to this. The authors offer an important nuance to this understanding. Originality/value The paper offers both theoretical and methodological insights for IB scholars interested in FDI motivation.

The UK is made up of broadly two types of local economies, characterised by two types of equilibria. One, 'high-skill equilibria', consists of richer localities throughout the country (e.g. London, South East, Cambridge, Oxford) which attract high-tech FDI, venture capitalists, high levels of innovation, skills and productivity. Another, 'low-skill equilibria' locations, have low levels of innovation, skills and productivity, even despite high levels of activity, in some cases. The notion of the two equilibria was recognised in an earlier volume of Contemporary Social Science and discussed in some detail in the editorial by Fai and Tomlinson (2023). The purpose of this paper is to explore the potential policy interventions for inward investment, focused not merely on growth, but on productivity growth, with the core purpose of helping lagging regions recover. We present a framework which explores how inward investment can be leveraged to 'move the dial' in lagging regions of the UK, rather than merely offering more of the same in terms of output, productivity and employment opportunities - which would attract activity that is subsequently rather divorced from the rest of the local economy. Our proposed framework summarises the nature of the interaction between multinational enterprises (MNEs) and the host economy, enriched with insights from supply chain analysis, economic geography and the trade-offs involved in delivering transformative growth and productivity.

At the time of writing, the UK government is attempting to tackle place-based inequality through its 'levelling up' agenda. To be effective, such interventions require local institutions with the capacity, powers, and budgets to develop and implement long-term strategies. Multi-level metagovernance, the ongoing reorganisation of local governance systems by the central state, has become a salient political process in England, characterised by fragmented system design, distorted local strategies, micromanagement and mistrustful central-local relations. These various problems are underpinned by a problematic combination of quasi-markets and state hierarchy. Together, these metagovernance mechanisms significantly constrain local capacity to deliver economic development.

The purpose of this paper is to establish a policy framework for those responsible for maximising the opportunities of inward foreign direct investment (FDI). Our proposed framework intellectualises the need for dynamic capabilities at the country level (national and local) to sense and seize new opportunities from inward FDI, use this knowledge to mobilise resources and, over time, make changes to reconfigure the UK’s location-specific advantages in a post-Brexit marketplace. Using the backdrop of the UK’s decision to exit the European Union in May 2016 (Brexit) alongside other global challenges (the COVID-19-induced supply chain crisis, political unrest, wars, new trade deals), we explore the changing nature of FDI entering the UK. We explain why an adaptive investment promotion strategy means greater and more widespread benefits of inward FDI for the economy. Then, we propose a policy-oriented dynamic framework for how the benefits of FDI can be maximised during political upheaval. In our analysis and discussion, we highlight how changes in foreign firms’ FDI motives can alter the UK’s value proposition, and over time, the nature of a country’s specific advantages.

The manufacturing industry is facing a major challenge in balancing economic performance with environmental sustainability. To address this challenge, extant research has suggested that servitization could help align these objectives. However, the current evidence base is too scattered for policymakers to act on and support servitization in a targeted manner. Therefore, we conduct a systematic literature review to analyze over 120 research papers to establish the current understanding of the impact of servitization on the environmental and economic performance of a firm, and identify the contextual variables affecting this impact. The study identifies and critically appraises the body of literature that provides the current evidence base on the impact of servitization, the core areas of impact investigated and the methods that are used to establish this impact. Additionally, we conduct a thematic analysis of variables of impact to explore the theoretical perspectives that are used to explain the impact of servitization. Building on these theoretical perspectives we offer concrete propositions to further develop the research on the impact of servitization on environmental and economic performance.

The purpose of this study is to explore the differential gains from internationalization for different forms of corporate governance. In particular, we seek to move from the question concerning whether firms are able to generate differential gains from internationalization, to the question of why. Our focus is on ownership structure, and the differential rates at which business group affiliated firms and standalone firms gain from internationalization. Using a unique data set of some 356 standalone and business group affiliated firms, we show that while the marginal gains from internationalization may be greater for standalone firms, business group firms are better able to exploit firm-specific assets, leveraging these into higher returns to internationalization.

As important actors in global value chains (GVCs), multinational enterprises exercise coordination and control over worldwide commodity, production, service, workforce and knowledge mobility. A level playing field for all GVC stakeholders remains absent. We argue for empowering subordinated stakeholders in the design of inclusive GVC governance, as a necessary condition, to harness the power of GVCs that enable many firms to internationalise in the first place. We propose a Framework for Intervention at the level of civil society and five actions, using a revived form of multilateralism, to empower the economic “South” and fundamentally anchor change for human development.