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2022, Research Handbook on Foreign Exit, Relocation and Re-entry: Theoretical Perspectives and Empirical Evidence, Pages -

Reinvest or not reinvest in the host country? Learning from past divestments to plan future actions (02a Capitolo o Articolo)

Mariotti SERGIO GIOVANNI, Marzano Riccardo, Piscitello Lucia

The international growth of a multinational enterprise (MNE) is not a linear forward-moving process, as it often involves a succession of investments, divestments and reinvestments in host countries (Tan et al., 2020; Vissak and Francioni, 2013; Welch and Welch, 2009). Divestments of foreign subsidiaries can be caused by changes in host countries, which make the activity of the subsidiary unprofitable and no longer sustainable. Otherwise, a divestment can be a consequence of factors endogenous to the MNE, such as: (1) strategic or operational mistakes on the entry decision and/or on the management of the subsidiary in the host country; (2) the decision to capitalize on the success of its business model, and to gain extra profits by selling the existing subsidiary on the market; or (3) the wish to obtain resources to be invested in more lucrative locations (Arte and Larimo, 2019; Benito, 2005; Boddewyn, 1983; Mariotti and Piscitello, 1999; Procher and Engel, 2018).
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