TITLE

Investor Response to Environmental Risk in Foreign Direct Investment

AUTHOR(S)
Goerzen, Anthony; Sapp, Stephen; Delios, Andrew
PUB. DATE
December 2010
SOURCE
Management International Review (MIR);Dec2010, Vol. 50 Issue 6, p683
SOURCE TYPE
Academic Journal
DOC. TYPE
Article
ABSTRACT
• The theory of internalization suggests that proprietary assets--usually in the form of advertising and/or marketing capabilities--are the key to understanding a firm's ability to create value in foreign markets. We show that the capacity of a multinational corporation (MNC) to create value in a foreign direct investment (FDI) can also result from the use of an alternative proprietary asset; that is, the skills and management expertise that are acquired through the accumulation of various forms of foreign experience. • The value creation comes from the extension of an MNC's experience-based capabilities to the host country to mitigate country-level risks. this experience can moderate the negative influence of environmental risk to create value for a firm and its investors. • In our sample of 305 FDIs, we find that Japanese MNCs that had direct or indirect experience in a host country showed greater abnormal returns in a FDI, particularly where environmental risk was high.
ACCESSION #
55458300

 

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