Foreign investment or divestment as a near-term solution to performance shortfalls? The moderating role of vicarious learning

Kent Ngan-Cheung Hui (), Yuanyuan Gong (), Qi Cui () and Naipeng Jiang ()
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Kent Ngan-Cheung Hui: Xiamen University
Yuanyuan Gong: Okayama University
Qi Cui: Renmin University
Naipeng Jiang: Fudan University

Asia Pacific Journal of Management, 2022, vol. 39, issue 4, No 12, 1509 pages

Abstract: Abstract Most studies on problemistic search do not pay sufficient attention to how below-aspiration organizations decide what types of strategic actions to use to cope with performance shortfalls. In this study, we examine the preferences of multinational corporations (MNCs) for selecting foreign investment or divestment as a near-term solution to performance shortfalls. We first argue that foreign divestment is generally a more preferred performance solution. Drawing on the literature on vicarious learning, we further argue that MNCs are more likely to engage in foreign investment or foreign divestment to combat large performance shortfalls if peers recently and actively undertook the same type of strategic action. Moreover, they are less likely to undertake the other type of strategic action simultaneously because they adopt the satisficing principle and time constraints deter them from implementing multiple types of strategic action substantially. The analysis of the data about Japanese manufacturing MNCs reveals that vicarious learning influences MNCs’ selection preferences in certain conditions, thereby extending the literature on problemistic search.

Keywords: Problemistic search; Vicarious learning; Japan; Turnaround; Foreign investment and divestment (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (2)

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DOI: 10.1007/s10490-021-09778-6

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