Risk propensity in the foreign direct investment location decision of emerging multinationals

Buckley, Peter J.; Chen, Liang; Clegg, L. Jeremy; Voss, Hinrich

doi:10.1057/s41267-017-0126-4

Cited by 91 publications

(74 citation statements)

References 97 publications

(148 reference statements)

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“…Maitland and Sammartino (, p. 736) regret that, despite acknowledging the assumption of bounded rational decisions, all internationalization schools “… are largely silent on the individual manager's role in shaping firm‐level market scanning, information collection and analysis processes”. Accordingly, internationalization literature has received increasing criticism for its omission of and the lack of microfoundations and behavioral theorizing (Aharoni et al, ; Buckley et al, , ; Clarke & Liesch, ). A number of scholars have called for more research on individual perceptions to advance theorizing on the microfoundations of internationalization and the role of distance (e.g., Ambos & Håkanson, ; Dow, ; Zaheer, Schomaker, & Nachum, ).…”

Section: Theoretical Backgroundmentioning

confidence: 99%

“…Although the Uppsala model takes into account possible tradeoffs (i.e., returns and risk from seeking international opportunities) for which the reference point is the tolerable risk level, the model focuses solely on risk with regard to commitment decisions (e.g., Figueira‐de‐Lemos et al, ). Buckley et al (, p. 156) suggest: “To examine truly how sensitive managers are to certain risks and what affects managerial risk propensity, it may be necessary to consider risk and return simultaneously.”…”

Section: Theoretical Backgroundmentioning

confidence: 99%

“…We add to research on international locations decisions by providing a microfoundations perspective (e.g., Felin, Foss, Heimeriks, & Madsen, ; Foss, ; Gavetti, ) and exploring managers' perceptions of risk and return, that is, their decision heuristics. To advance our understanding of the decision heuristics managers apply in their location choice, we conducted discrete choice experiments (Louviere, Hensher, & Swait, ; Buckley et al, for a similar approach). The experiments mimic the decisions managers take for their companies in terms of location choice and capture choices with different risk and return patterns.…”

Section: Introductionmentioning

confidence: 99%

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How does de‐globalization affect location decisions? A study of managerial perceptions of risk and return

Ambos

Cesinger

Eggers

et al. 2019

Global Strategy Journal

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Research Summary Our understanding of how managers take international location decisions is still scarce. Building on the microfoundations view, we explore managers' perceptions of risk and return in a discrete choice experiment with 2,618 decisions in 2013 (a globalizing world) and 2017 (a de‐globalizing world). While managerial perceptions vary over time due to economic and political changes, such as the current de‐globalization trend, decision heuristics remain remarkably stable: locations perceived as least risky offer the highest expected returns. We also find that distance is a good proxy for managerial perceptions. Investigating the microfoundations of decision‐making we show that international experience, risk‐taking propensity, and shareholder status affect heuristics. In sum, our study provides novel insights into the microfoundations of location decisions and extends the behavioral perspective on internationalization. Managerial Summary While many researchers in the field of international business and global strategy have studied internationalization, surprisingly few of them put the actual decision maker in the spotlight. This study investigates the decision heuristics of managers who are confronted with international location decisions. We show that their perceptions of risk and return in the context of a globalizing world (in 2013) and in the context of a de‐globalizing world (in 2017) vary. However, the underlying heuristic—locations that are perceived as least risky offer the highest expected returns—remains stable. Our study also indicates that distance is a good proxy for managerial decisions and that managers' international experience, risk‐taking propensity, and shareholder status affect their decision‐making patterns.

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Section: Theoretical Backgroundmentioning

confidence: 99%

Section: Theoretical Backgroundmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

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How does de‐globalization affect location decisions? A study of managerial perceptions of risk and return

Ambos

Cesinger

Eggers

et al. 2019

Global Strategy Journal

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“…The ''Go Global'' agenda introduced to promote Chinese OFDI abroad (Buckley et al 2017a(Buckley et al , 2018) is an intrinsic part of state capitalism within China. Following the announcement of the Go Global strategy, regional forums were established in Central and Eastern Europe, and elsewhere, to foster new international economic relationships with China, and to encourage Chinese firms to identify overseas partners in these economies.…”

mentioning

confidence: 99%

“…This is especially pertinent in the light of the attitude of Chinese investors towards risk, which has been found to be mixed, and is probably complex. While Buckley et al (2017a) inferred that Chinese investors are risk-takers, more recent work suggests a more nuanced picture (Buckley et al 2017a). The argument for complexity is supported by Han et al (2017) who investigate how Chinese firms conceive of risks in the EU and Africa and how they translate this into their strategies.…”

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confidence: 99%

Chinese Outward FDI as a Stimulus to Research in International Business

Clegg

Voss

2018

Manag Int Rev

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Political risks and foreign direct investments by multinational corporations: A reference point approach

Yasuda

Kotabe

2020

Global Strategy Journal

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Research Summary The purpose of this study is to develop a behavioral framework for management decision‐making under bounded rationality to analyze foreign direct investments and political risks in host countries. This study shows that managers construct reference points on political risks and assess actual political risks in host countries relative to these reference points. This study considers that the political risk reference point is a mental map made up of (a) perceived political risks in host countries where multinational corporations (MNCs) operate and (b) home country political risks. We find that MNCs interpret political risks in host countries as opportunities (threats) if the political risks are below (above) their reference points. Our study provides a significant contribution to the literature on microfoundations of location strategy. Managerial Summary Prior empirical studies have found both positive and negative effects of political risks on MNCs' investments. This study develops a behavioral framework for MNCs' boundedly rational decision‐making in political risk assessment. Characterizing political risks in host countries by the concept of a political risk reference point resolves the contradictory findings in the literature. Using data from the global mining industry, we find that MNCs interpret political risks in host countries as opportunities (threats) if the political risks are below (above) their PRRPs. We also show that the other competing companies' reference points do not have significant effects on MNCs' investment decisions. These findings offer managerial implications because they help managers predict competitors' actions.

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Risk propensity in the foreign direct investment location decision of emerging multinationals

Abstract: This is a repository copy of Risk propensity in the foreign direct investment location decision of emerging multinationals.

Cited by 91 publications

References 97 publications

How does de‐globalization affect location decisions? A study of managerial perceptions of risk and return

How does de‐globalization affect location decisions? A study of managerial perceptions of risk and return

Chinese Outward FDI as a Stimulus to Research in International Business

Political risks and foreign direct investments by multinational corporations: A reference point approach

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