Publication Type
Journal Article
Version
acceptedVersion
Publication Date
2-2018
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 noncontrollable risk (e.g., political instability). In contrast, firms' potential slack reduces relative risk propensity regarding controllable risk, yet amplifies the tendency to take noncontrollable risk. We suggest that these counterbalancing effects might help explain prior ambiguous findings on the relationship between experience, slack, and FDI decisions. The study provides a new understanding of why firms exhibit heterogeneous responses to host country risks, and the varying effects of institutions.
Keywords
decision-making, country risk, heterogeneity, domestic experience, slack, quasi-experimentation
Discipline
International Business | Strategic Management Policy
Research Areas
Strategy and Organisation
Publication
Journal of International Business Studies
Volume
49
Issue
2
First Page
153
Last Page
171
ISSN
0047-2506
Identifier
10.1057/s41267-017-0126-4
Publisher
Palgrave Macmillan
Citation
BUCKLEY, Peter J.; CHEN, Liang; CLEGG, L. Jeremy; and VOSS, Hinrich.
Risk propensity in the foreign direct investment location decision of emerging multinationals. (2018). Journal of International Business Studies. 49, (2), 153-171.
Available at: https://ink.library.smu.edu.sg/lkcsb_research/7234
Copyright Owner and License
Authors
Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial-No Derivative Works 4.0 International License.
Additional URL
https://doi.org/10.1057/s41267-017-0126-4