Make-or-Break Decisions in Choosing Foreign Direct Investment Locations

Lailani Laynesa Alcantara, Hitoshi Mitsuhashi

Research output: Contribution to journalArticlepeer-review

18 Citations (Scopus)

Abstract

Firms have variable risk preferences in decision-making processes, but previous studies in the field of international management tend to view firms as inherently risk averse, and risky location choice as rare and exceptional. Drawing upon the arguments of problemistic search and slack search, we investigate the conditions under which firms make risky choices of location for foreign direct investments. Using longitudinal international expansion data on firms in the Japanese auto parts industry, we find that although firms generally avoid risk in choosing foreign direct investment destinations, they take risks when facing intense home-country competition and a lack of business group affiliation. Nonetheless, we find that small firms with business group affiliation are more likely to enter host countries with high political instability than are large firms with such affiliation.

Original languageEnglish
Pages (from-to)335-351
Number of pages17
JournalJournal of International Management
Volume18
Issue number4
DOIs
Publication statusPublished - 2012 Dec
Externally publishedYes

Keywords

  • Business groups
  • Competition
  • Foreign direct investment
  • Problemistic search
  • Risk
  • Slack search

ASJC Scopus subject areas

  • Business and International Management
  • Finance
  • Strategy and Management

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