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

Lailani Laynesa Alcantara, Hitoshi Mitsuhashi

Research output: Contribution to journalArticle

14 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

Fingerprint

Foreign direct investment
Business groups
Risk-averse
Host country
Decision-making process
Risky choice
Destination
Risk preferences
Home country
Political instability
Location choice
Small firms
International expansion
Large firms
International management
Industry

Keywords

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

ASJC Scopus subject areas

  • Business and International Management
  • Strategy and Management
  • Finance

Cite this

Make-or-Break Decisions in Choosing Foreign Direct Investment Locations. / Alcantara, Lailani Laynesa; Mitsuhashi, Hitoshi.

In: Journal of International Management, Vol. 18, No. 4, 12.2012, p. 335-351.

Research output: Contribution to journalArticle

Alcantara, Lailani Laynesa ; Mitsuhashi, Hitoshi. / Make-or-Break Decisions in Choosing Foreign Direct Investment Locations. In: Journal of International Management. 2012 ; Vol. 18, No. 4. pp. 335-351.
@article{c76af88f8dc5403db120b0583f7f4ec3,
title = "Make-or-Break Decisions in Choosing Foreign Direct Investment Locations",
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.",
keywords = "Business groups, Competition, Foreign direct investment, Problemistic search, Risk, Slack search",
author = "Alcantara, {Lailani Laynesa} and Hitoshi Mitsuhashi",
year = "2012",
month = "12",
doi = "10.1016/j.intman.2012.07.002",
language = "English",
volume = "18",
pages = "335--351",
journal = "Journal of International Management",
issn = "1075-4253",
publisher = "Elsevier Inc.",
number = "4",

}

TY - JOUR

T1 - Make-or-Break Decisions in Choosing Foreign Direct Investment Locations

AU - Alcantara, Lailani Laynesa

AU - Mitsuhashi, Hitoshi

PY - 2012/12

Y1 - 2012/12

N2 - 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.

AB - 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.

KW - Business groups

KW - Competition

KW - Foreign direct investment

KW - Problemistic search

KW - Risk

KW - Slack search

UR - http://www.scopus.com/inward/record.url?scp=84868206698&partnerID=8YFLogxK

UR - http://www.scopus.com/inward/citedby.url?scp=84868206698&partnerID=8YFLogxK

U2 - 10.1016/j.intman.2012.07.002

DO - 10.1016/j.intman.2012.07.002

M3 - Article

VL - 18

SP - 335

EP - 351

JO - Journal of International Management

JF - Journal of International Management

SN - 1075-4253

IS - 4

ER -