A promising marriage that ended in divorce: a longitudinal case study of foreign divestment

Daojuan Wang and Juan Wu

Chapter 9 in Research Handbook on Foreign Exit, Relocation and Re-entry, 2022, pp 183-209 from Edward Elgar Publishing

Abstract: Using a longitudinal case study, this chapter unveils the critical antecedents and their impacting mechanisms leading to foreign divestment, particularly the divestment of strategic assets in developed markets that acquirers from emerging markets fervently pursued. This interesting phenomenon is not yet sufficiently understood. Most studies on this topic apply quantitative methods and use one-time data collection; thus, the dynamic evolutionary process from foreign direct investment to divestment is under-researched. This study is based on 22 in-depth interviews conducted during 2012-2020 with top managers of both the subsidiary and the parent firm and external experts involved in the acquisition process, complemented by extensive secondary data. Through the analysis, the evolutionary process from initial investment to foreign divestment is depicted and discussed. Meanwhile, a conceptual framework is developed from a reversed eclectic paradigm perspective that identifies particular antecedents and six mechanisms of foreign divestment. This study advances our understanding of the reasons behind foreign divestment and contributes to the development of foreign divestment theories. Specific lessons can be drawn from this failed investment case, and the developed framework offers a practical guideline.

Keywords: Business and Management; Economics and Finance (search for similar items in EconPapers)
Date: 2022
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