Explaining the performance of divested overseas subsidiaries |
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| Institution: | 1. Vienna University of Economics and Business, Welthandelsplatz 1, Building D1, 1020 Vienna, Austria;2. University of Sussex Business School, University of Sussex, Falmer, Brighton, BN1 9RH, United Kingdom;3. University of Liverpool, Management School, Chatham Street, Liverpool L697ZH, United Kingdom;1. University of Sussex, United Kingdom;2. East Carolina University, United States;1. Manchester Metropolitan University, United Kingdom;2. Uppsala University, Sweden;3. University of Richmond, United States;1. Institute for Retail Studies, University of Stirling Management School, University of Stirling, Stirling, Scotland, FK9 4LA, UK;2. Department of Geography, National University of Singapore, 1 Arts Link, Kent Ridge Crescent, 117570, Singapore;1. Department of Strategy and International Business, Surrey Business School, University of Surrey, Guildford, Surrey, GU2 7XH, United Kingdom;2. Department of International Business, Korea University Business School, Korea University, Anam-dong, Seongbuk-gu, Seoul, 136-701, Republic of Korea;1. School of Business, Renmin University of China, Haidian District, Beijing 100872, China;2. School of Economics, Renmin University of China, Haidian District, Beijing 100872, China;3. School of International Economics & Business, Nanjing University of Finance & Economics, Nanjing 210046, China;4. Nottingham University Business School, University of Nottingham, Jubilee Campus, Nottingham NG8 1BB, United Kingdom;1. School of Economics and Business Administration, University of Tartu, J. Liivi 4-302, 51009, Tartu, Estonia;2. Department of Communication Sciences, Humanities and International Studies, Cultures, Languages, Literatures, Arts, Media (DISCUI), University of Urbino “Carlo Bo”, Via Saffi 15, 61029, Urbino, Italy;3. School of Management, University of South Australia Business School, Way Lee Building, Room WL5-34, SA, 5000, Adelaide, Australia;4. Department of Management, Faculty of Business and Economics, Macquarie Business School, Macquarie University, NSW 2109, Australia |
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| Abstract: | We examine the post-divestment performance of subsidiaries that have been divested by their foreign owners and have subsequently been acquired by domestic owners. Drawing on Hymer’s classic explanation of firm internationalization and on the resource-based view dimension of internalization theory, we suggest that the differences in terms of the degree to which FSAs are independent from the linkages to the parent firm will be reflected in the variation in the performance effect of a foreign-to-domestic sale of the business. We argue that the negative performance effect of a foreign-to-domestic sale of a subsidiary is lower (1) for older subsidiaries, (2) for subsidiaries oriented toward the domestic, and (3) when the foreign parent firm is located outside the subsidiary’s geographic region. By using propensity score matching and difference-in-differences estimations, we examine the proposed effects and provide novel insights on the performance implications of the foreign-to-local ownership changes. |
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| Keywords: | Foreign divestment Post-divestment performance Internalization theory Subsidiary-level FSAs Foreign sell-offs Subsidiary performance |
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