Who is to blame? The effects of conflict actors on foreign subsidiary exit

초록

Combining institutional theory and resource dependence theory, this study investigates how violent conflicts and shifts in political governance, particularly the erosion of democratic institutions, impact subsidiary exit decisions, emphasizing the role of conflict actors. Analyzing 3,779 foreign subsidiaries operated in 11 conflict-affected countries over 25 years, we find that conflict involvement by both the host country government and informal parties increases the exit rates of foreign subsidiaries. However, owing to the differences in the mechanisms through which violent conflicts affect political governance, the strategies to cope with these heightened exit rates vary depending on the actors involved in conflicts. Specifically, being part of global valuechain activities mitigate risks in government-led conflicts by reducing dependence on local institutions. On the other hand, staffing a foreign subsidiary with local employees helps mitigate the risks by providing better information and enhancing legitimacy.

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