Abstract:

This study examines the reputational consequences that occur when multinational enterprises (MNEs) exit one country to relocate operations into another. We argue that the reputational impact of exit for relocation hinges not on MNEs’ actions and official framing, but on stakeholders’ interpretation of the event. Building on attribution theory, we theorize that organizational stakeholders rely on simplified heuristics to interpret relocation and proceed to make judgements about the firm. We find that stakeholder attributions enhance reputational risks, in some instances, but not others. We build our empirical modelling on a proprietary dataset of 610 international relocations by 397 MNEs between 2013 and 2023. We propose three attributional factors which guide stakeholder reputation assessments in light of relocation: ‘undesirability’; ‘pervasiveness’; and ‘exploitativeness’. Our results show that MNEs’ reputational risk increases when relocation is undesirable, and stakeholders are vulnerable, such as in times of crises. If relocation is pervasive, it may be normalized; if not, exit by individual MNEs may elicit greater reputational risk. Relocation also varies in its reputational risks when a firm’s behavior violates stakeholders’ prior expectations. We conclude with our main theoretical implications and call for scholars to acknowledge stakeholders as increasingly important agents in determining foreign divestment outcomes.

Please choose your submission type: Full Paper

Primary Track: International Business and International Management

Keywords: Internationalization: theories;Internationalization: strategy;International: business;International: management

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Prof Kamel Mellahi