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Journal of Economic Geography Advance Access originally published online on February 14, 2005
Journal of Economic Geography 2005 5(2):235-251; doi:10.1093/jnlecg/lbh041
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© The Author (2005). Published by Oxford University Press. All rights reserved. For Permissions, please email: journals.permissions{at}oupjournals.org

Divestment and international business strategy

Gabriel R. G. Benito*

* Department of International Economics and Management, Copenhagen Business School, Howitz vej 60, DK-2000 Frederiksberg, Denmark; and Norwegian School of Management BI, N-1300 Sandvika, Norway. email <gb.int{at}cbs.dk>

Abstract

This paper deals with divestment, i.e., the closure or sell-off of units in foreign locations, or conversely units owned by foreign firms. Such actions are discussed from the perspective of the firms making such decisions, and divestment assessments are looked at through the lens of international business strategy. Based on the integration-responsiveness framework of international business strategy, it is argued that the divestment propensities of foreign subsidiaries depend on the type of strategy pursued by the corporation. Subsidiaries of transnational corporations are in general likely to display the highest divestment rates. Whereas subsidiaries forming part of international and multi-domestic strategies may have the lowest divestment likelihood initially, subsidiaries established as part of a global strategy are expected to be the least probable to be divested in the longer run.

Keywords: Divestment, multinational company, international strategy,
JEL classifications: F21, F23, M21, L10
Date submitted: 5 December 2003     Date accepted: 27 May 2004


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