Abstract:
The eclectic paradigm stipulates that foreign direct investment (FDI) is viable only if a firm possesses an ownership advantage to counter barriers to national market entry. However, when a firm is engaged in relocationary FDI (RDFI) it offsets its investment in the host nation with a divestment outside it. If the relocating firm needs to overcome barriers to national market exit when it engages in FDI, it must possess an unidentified advantage analogous to, yet distinct from, the ownership advantage. This study attempts to determine how national exit-barriers impact on a firm’s reported probability of undertaking RFDI, using an ordinal regression analysis of online-survey data specifically collected for the purpose. Results suggest political and strategic exit-barriers from the origin nation are significant inhibitors to RFDI. The implications of this finding are discussed.