Giving a fish or teaching to fish? Exploring the effects of home-country governmental support on foreign exit decisions

Abstract

PurposeTo help firms with their international operations, governments often create policies and support mechanisms, but its influence on the firm's exit decision has so far been ignored. Hence, the purpose of this study is to examine the impact of home-country governmental support on the firm's exit decision.Design/methodology/approachThe authors test their conceptual model using multiple informants as well as secondary data from China. The sample consists of 360 valid questionnaires from 180 firms. Binary logistics regression is used to test the conceptual framework.FindingsBy demonstrating that resource-based and institutional constructs are highly dependent, the authors show how home-country governmental support interacts with the foreign affiliate's past performance to explain the decision to remain or exit a foreign market. The results indicate that while governmental financial support reduces the likelihood of exiting a poorly performing business in the foreign market, governmental non-financial support surprisingly has an opposite effect.Originality/valueWhile there has been an increasing number of firms exiting foreign markets, this area of research is still limited. The study also contributes to the literature by focusing on home-country governmental financial and non-financial support to explain the firm's exit decision – an issue that has been ignored and is expected to be particularly relevant for firms from emerging economies.

Entrepreneurial passion and family SMEs internationalization success: examining the moderating effect of the adversity of fragile countries

“…Supplemented by the institutional theory, the resource dependency theory states that frustrated entrepreneurs of family SMEs in developing countries, who are challenged by the lack of support and resources that are provided by the formal and informal institutions, may consider the internationalization of their firms to dilute the increased business risks in their home countries (Dependence and Dalziel, 2016; Tan and Sousa, 2020). Similarly, Gomez-Meji et al (2010) argued that decision-makers may be pulled by the risk avoidance consideration in family SMEs toward larger internationalization to make the domestic business risks less.…”

“…Moreover, prior studies demonstrated how family SMEs significantly bypass their internationalization limitations to contribute positively to the host and domestic economies (De Massis et al , 2018; Eddleston et al , 2020). Secondly, already established family SMEs in fragile countries may opt for the internationalization of their firms as an opportunity to face the challenges of their disruptive contexts (Dependence and Dalziel, 2016; Tan and Sousa, 2020). However, Azour et al (2022) explicitly describe how fragility may hit different countries, even those considered as more stable because of the economic uncertainty around the world, the repercussions of COVID-19, the increased refugee flows and the latest Russia’s war in Ukraine which make any family SME more vulnerable.…”

Understanding the De‐internationalization of Entrepreneurial SMEs in a Volatile Context: A Reconnoitre on the Unique Compositions of Internal and External Factors

“…(2016), the level of perceived uncertainty, lower international transaction costs, and firms’ international performance are strongly associated with the environmental institutions within the domestic market. Thus, the external pressures from the home country institutions significantly impact entrepreneurs’ decisions to expand or withdraw from international markets (Tan and Sousa, 2020). Such pressures typically originate from the three categories of coercive, mimetic, and normative pressures (Martínez‐Ferrero and García‐Sánchez, 2017).…”

Archetypes of Driver Combinations Leading to Foreign Market Exit: An Investigation into European Grocery Retailing

“…In the general foreign subsidiary divestment literature, divestment drivers are often categorized into three levels: (1) drivers at the parent-company level (e.g., financial performance of the parent company), (2) drivers at the host-country level (e.g., political and economic risk in the host country), and (3) drivers at the subsidiary level (e.g., financial performance of the subsidiary) (e.g., Berry, 2009;Tan & Sousa, 2020).…”

“…To create a typology of exit driver combinations, we first deductively attributed the nine exit drivers to the three levels of divestment drivers often found in the literature (e.g., Berry, 2009;Tan & Sousa, 2020): the subsidiary level, the host-country level, and the parent-company level (see top of Table 2). Then, based on the configurational approach (Macharzina & Engelhard, 1991;Meyer et al, 1993;Miller, 1986), we built archetypes of exit driver combinations.…”