Publication Type

Journal Article

Version

acceptedVersion

Publication Date

6-2016

Abstract

Studies of how firms respond to host country risk have assigned explanatory primacy to organizational capability and managerial risk preference. The organization-level account is built on the premise that capability is a prerequisite for risk-taking while the individual-level account focuses on the managers' intrinsic behavioral attitude. Without integrating one with the other, the former is open to many alternative explanations while the latter remains only a source of heterogeneity. We propose that employing the microfoundations approach can address the limitations of each account and yield a fuller understanding of FDI risk-taking. Drawing upon behavioral decision theory and the concept of risk propensity, we describe the lower-level mechanisms that generate the empirical regularity between firm experience and risk-taking, which has been attributed to the macro-level capabilities paradigm. We finalize the framework with an account as to how individual-level mechanisms can be incorporated into the context of organizational strategic decision-making.

Keywords

Country risk, Risk propensity, Microfoundations, Behavioral decision-making, Experience

Discipline

Finance and Financial Management | International Business | Strategic Management Policy

Research Areas

Strategy and Organisation

Publication

Journal of International Management

Volume

22

Issue

2

First Page

131

Last Page

146

ISSN

1075-4253

Identifier

10.1016/j.intman.2016.02.001

Publisher

Elsevier: 24 months

Copyright Owner and License

Authors

Additional URL

https://doi.org/10.1016/j.intman.2016.02.001

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