The divestment-reinvestment sequence in foreign countries: The role of relational vs. transactional ownership

In this paper, we claim that ownership is a key determinant of the firms' divestment-reinvestment sequence in a foreign country. Building on the notion of ‘relational vs. transactional ownership’, we distinguish between relational-type firms (namely, family-owned and state-owned firms), and transactional-type firms (privately non-family-owned firms). We argue that relational-type firms are less likely to both divest from, and reinvest in, a given foreign country. In fact, relational owners set a lower performance threshold of intervention than transactional ones; additionally, in order to turn the tide, the former often increase resource injection when subsidiary performance falls below the threshold. Such an escalation of commitment increases sunk costs and further decreases the likelihood of divesting the subsidiary. Moreover, when a divestment occurs, the memory of high sunk costs incurred reduces the propensity to reinvest in the same host country. We test our conceptual framework on a large sample of investments, divestments and subsequent re-entries undertaken in the period 2000–2015 by 602 Italian firms. Our econometric findings corroborate our hypotheses, thus contributing to the literature on the interdependencies between divestment and reinvestment choices, and their relationships with corporate ownership

Internationalization of regions: the role of public policy

The main purpose of this article is to build on previous efforts to investigate the effects of Out-ward-FDI promotion measures taken by governments and levels of outward foreign investment at regional level. We examine regional levels of outward FDI within Italy, a country with marketed regional asymmetries. Within the European arena, the heterogeneity of socio-economic condi-tions among Italian regions is a clear example of intra-border imbalances. In fact, the different growth rates characterizing the various areas of Italy are far from being an exception in the Un-ion, where diversity across member states is a reflection of domestic socio-economic disparities strongly concentrated in space and reproduced over time. The study allows also to investigate and to compare different types of incentives (financial and non-financial). Finally it provides evi-dences on the non-policy factors that determine the spatial evolution of O-FDI projects, a theme deserving careful and close attention. For the empirical model we use information on the population of Italian firms that received in-centives from 2000-2007. Data, aggregated at the regional level, refers to the major public tools implemented to promote Italian companies’ internationalization

Re-Evaluating the Offshoring Decision: A Behavioural Approach to the Role of Performance Discrepancy

Firms are in a continuous process of critically re-evaluating their offshoring strategies due to performance discrepancies. While prior research has focused on the implementation of organizational responses to performance shortfalls, we examine the offline search process, a key antecedent of organizational change, during which firms simultaneously explore alternative solutions when facing either a positive or a negative discrepancy between performance and aspirations. We adopt the Behavioural Theory of the Firm (BTOF) to investigate how the search process is affected by the size and nature (as being positive or negative) of the discrepancy as well as how it is moderated by cognitive biases. By examining 441 offshoring initiatives, we study firms' search processes in a novel context that refers either to ‘local’ solutions that are close to the current activity (i.e., expansion in the same host country) or ‘distant’ solutions that are far from the current one (i.e., relocation to a third country or to the home country). Our results provide new insights into organizational search, namely that performance shortfalls lead to distant search unless this choice is moderated by a location-specific anchor bias relating to the strategic importance of host location, while positive discrepancies trigger local search with decision-makers more inclined to consider expansion in the current host country

The enhancing effect of human capital on the FDI and Economic Growth nexus

The importance of Human Capital accumulation in order to achieve greater economic growth is not neglected in economic theory. In this paper we look at the importance of human capital for enhancing the effect of another factor, inward foreign direct investment (FDI), that may affect growth. Governments in all continents now compete actively for FDI but not all countries reap the full benefits from it. Our study demonstrates that FDI has a greater impact on GDP growth for OECD countries that meet minimum thresholds of absorptive capacity measured by human capital proxy and private R&D. An active policy towards FDI implies therefore to support human capital development, learning and investment by local firms, as a way not only to attract high quality FDI but also to enhance the potential benefits arising from foreign presence

Longitudinal transactional relationships between caregiver and child mental health during the COVID-19 global pandemic

Background Emerging work examining the psychological impact of COVID-19 on children and families suggests that the relationship between pandemic-related stress, child psychosocial functioning, and caregiver mental health are interrelated. However, much of this research is unidirectional and thus little is known about the bidirectional cascading effects children and caregivers may experience. The current study examined the transactional relationships between caregiver and child mental health over time during the COVID-19 pandemic. Methods Linguistically, racially, and ethnically diverse caregivers (N = 286) of young children completed measures of caregiver mental health, caregiver pandemic-related stress, and child mental health (i.e., externalizing, internalizing, prosocial behavior) across three time points in the spring of 2020. Results Using autoregressive cross-lagged analyses, impaired caregiver mental health at Time 1 (April 2020) predicted increased caregiver pandemic-related stress at Time 2 (May 2020). Caregiver pandemic-related stress at Time 1 predicted increased child internalizing symptoms at Time 2 which, in turn, predicted increased caregiver pandemic-related stress at Time 3 (July 2020). Lastly, impaired caregiver mental health at Time 2 (May 2020) predicted increased child externalizing symptoms at Time 3 (July 2020). Conclusions Assessing transactional relationships between child and caregiver mental health during the COVID-19 pandemic is important to inform models of risk and resilience. Interventions at the level of the caregiver, the child, and/or the family should be considered as a way to interrupt potential negative developmental cascades

Multinational enterprises and the provision of collective goods under formal and informal institutional voids. The case of electricity in sub-Saharan Africa

Despite their unprecedented growth, developing countries still face severe problems in the provision of collective goods. Electricity, whose provision is scarce or unreliable in most developing regions, especially in sub-Saharan Africa, is an emblematic case. The reason for this shortage is not only imputable to the lack of effective formal institutions, but also to the inefficacy of informal institutions in enabling alternative solutions for the production, transmission and distribution of electricity. In this context of “double institutional void”, multinational enterprises (MNEs) can play a decisive role. However, we claim that their effectiveness depends on both the formal and informal institutional proximity that exists between the country of origin and the destination of the multinational company. Our econometric analysis relies on a sample of pairs of home-host countries, the latter of which are all from sub-Saharan Africa, observed from 2005 to 2011. Our findings confirm our expectations