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Risk propensity in the foreign direct investment location decision of emerging multinationals

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journal contribution
posted on 2023-06-09, 08:18 authored by Peter J Buckley, Liang Chen, L Jeremy Clegg, Hinrich Voss
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 non-controllable risk (e.g., political instability). In contrast, firms’ potential slack reduces relative risk propensity regarding controllable risk, yet amplifies the tendency to take non-controllable risk. We suggest that these counterbalancing effects might help explain observation that risk-taking in FDI location decisions is influenced by firm experience and context. The study provides a new understanding of why firms exhibit heterogeneous responses to host country risks, and the varying effects of institutions.

History

Publication status

  • Published

File Version

  • Accepted version

Journal

Journal of International Business Studies

ISSN

0047-2506

Publisher

Palgrave Macmillan

Issue

2

Volume

49

Page range

153-171

Department affiliated with

  • Strategy and Marketing Publications

Research groups affiliated with

  • International Business Publications

Full text available

  • Yes

Peer reviewed?

  • Yes

Legacy Posted Date

2017-10-16

First Open Access (FOA) Date

2017-10-16

First Compliant Deposit (FCD) Date

2017-10-16

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