Foreign divestment in the integration development path of Greece

Abstract

Research on Investment Development Path (IDP) primarily focuses on conventional FDI. Instead, our study extends the IDP to explore foreign divestment within the European integration process approaching foreign divestment risk as the outcome of an interaction between regional integration and economic development. This is the main contribution of the study. In particular, the paper explores divestment risk when the emerging economy of Greece enters the single market which is considered as a crucial turning point for its development path. The analysis focuses on the divestment outcome of 162 MNE subsidiaries established during the protectionism era and finds considerable manufacturing divestment during the transition from protectionism to regional integration in spite of the positive development of the Greek economy. However, the divestment effects of the individual explanatory variables used in the study are asymmetrical. The findings provide useful lessons for economic policy in emerging economies entering a developed integrated area, having interesting integration and FDI policy implications and venues for future research.

Foreign divestments: a review and research agenda

“…Subsidiaries established to benefit from tariff barriers, low wages and protectionism become uncompetitive once a country becomes more liberalized and assimilated into the global economy. Georgopoulos et al (2018) find that many firms in Greece started becoming uncompetitive after joining the European Union, causing large-scale divestments. Changes in a company’s strategic outlook and volatile macroeconomic conditions with unfavorable exchange rates are the most common causes of FD in developing countries (Kusek and Silva, 2018).…”