Performance feedback and location choice of foreign direct investment |
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| Institution: | 1. Waseda University, School of Commerce, 1-6-1 Nishiwaseda, Shinjuku-ku, Tokyo 169-8050, Japan;2. University of Hawaii at Manoa, The Shidler College of Business, Department of Marketing, 2404 Maile Way, Honolulu, HI 96822, USA;3. School of Management and Entrepreneurship, Kyambogo University, P.O.Box 1 Kyambogo, Kampala, Uganda;4. School of Business, Uganda Christian University, P.O. Box 4, Mukono, Uganda;5. Anheuser-Busch Hall 223, Department of Marketing, College of Business Administration, University of Missouri-St. Louis, One University Boulevard, St. Louis, MO 63211, USA |
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| Abstract: | Integrating the behavioral theory of the firm and the OLI paradigm, this paper studies how performance feedback affects the location choice of emerging market firms between developed countries (DCs) and less developed countries (LDCs) during the process of internationalization. Using the sample of 1,306 Chinese public listed firms which established new foreign subsidiaries between 2008 and 2019, we find that the further a firm’s performance is below aspiration, the more likely it will invest in LDCs than DCs, whereas the further a firm’s performance is above aspiration, the more likely it will invest in DCs than LDCs. In addition, technology-based capability and labor intensive production capability have moderating effects on the relationship between performance feedback and location choice between DCs and LDCs. This paper complements and extends the OLI paradigm by injecting dynamic and non-economic factors to explain OFDI location choice. |
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| Keywords: | Location choice Performance feedback Developed countries Less developed countries Behavioral theory of the firm OLI |
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