Foreign Subsidiary Divestment Strategies in Multinational Enterprises
Summary
Multinational enterprises (MNEs) regularly reassess their global portfolios to optimise performance, manage risk and respond to shifting political and economic landscapes. Foreign subsidiary divestment strategies encompass the planned withdrawal, sale or closure of overseas units, whether by partial equity reduction or complete exit. These strategies are shaped by a mix of internal factors, such as managerial capabilities and performance feedback, and external pressures, including host-country friction, geopolitics and ethical considerations. Empirical research distinguishes between gradual, partial divestments—often accompanied by resource redeployment or renegotiation of ownership—and abrupt full exits driven by crises or strategic realignment. The sequence of divestment and potential reinvestment illustrates the complex interplay between sunk cost biases, relational versus transactional ownership models and dynamic capabilities that govern managerial decision-making. Practically, effective divestment can free resources for core activities, preserve corporate reputation and mitigate exposure to volatile markets. The global significance of this field has intensified in the context of trade tensions, deglobalisation trends and mounting calls for corporate responsibility.
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Foreign Subsidiary Divestment Strategies in Multinational Enterprises publication trend
The graph below shows the total number of articles in foreign subsidiary divestment strategies in multinational enterprises across all publications each year (not limited to Nature Index journals).
Technical terms
Foreign subsidiary: A legally distinct entity established by an MNE in a host country to conduct business activities abroad.
Divestment: The process by which a parent company reduces or relinquishes ownership in a foreign subsidiary through sale, equity reduction or closure.
De-internationalization: The strategic reversal of internationalisation, where firms reduce or withdraw from foreign markets either partially or completely.
Cultural friction: A composite measure that captures cultural distance moderated by the degree of firm-level interaction, influencing the likelihood of subsidiary divestment.
Global dynamic managerial capabilities: The skills, experience and cognitive frameworks of top management that enable MNEs to sense, seize and reconfigure resources across borders, affecting divestment decisions.
References
- Self-Interest over Ethics: Firm Withdrawal from Russia After the Ukraine Invasion. Journal of Business Ethics (2024).
- Foreign divestment: the missing piece in international business scholarship. Journal of International Business Studies (2024).
- The divestment-reinvestment sequence in foreign countries: The role of relational vs. transactional ownership. Long Range Planning (2023).
- Understanding foreign divestment: The impacts of economic and political friction. Journal of Business Research (2022).
- The Curvilinear Impact of Cultural Friction on Foreign Divestment. Management International Review (2024).
- Do global dynamic managerial capabilities affect MNEs' divestments of their overseas subsidiaries?. Journal of International Management (2025).
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