Forced and Voluntary Divestment by MNCs: Reconfiguration of International Operations

Prior literature examines the characteristics of subsidiaries, parent firms, and host and home countries to explain why multinational corporations (MNCs) divest foreign subsidiaries. These studies assumed that MNCs divest foreign operations for passive reasons, such as poor performance. The present study argues that two divestment motivations exist, namely, (1) forced divestment and (2) voluntary divestment, and also compares how the antecedents and magnitude of divestments differ depending on the motivation. To compare the two forms of divestment, we focus on three primary factors: (1) the subsidiary, (2) MNCs, and (3) host country. We predict (1) that a subsidiary performance effect is stronger in a forced divestment than in a voluntary divestment, (2) that MNC development around a focal subsidiary strongly influence a voluntary divestment rather than a forced divestment, and (3) that forced divestment occurs in growing host countries, whereas voluntary divestment occurs in mature host countries. We use data from Japanese foreign affiliates to support our hypotheses.