Multilatinas’ foreign divestment and host country institutional uncertainty: is there a best entry strategy?

Abstract

Purpose This paper aims to investigate the divestment behavior of emerging market multinationals from Latin America – multilatinas – by examining how their foreign market entry decision impacts the likelihood of subsidiary divestment. Design/methodology/approach The hypotheses are tested using Cox’s proportional hazard rate model in a longitudinal database of Brazilian multinational companies established in 43 countries. Findings Results indicate that these subsidiaries can thrive in environments that bear similarities to their home country, being less likely to divest in institutionally weak countries. Contrary to developed country multinationals, these firms benefit from foreign entry decisions that entail handling partnerships abroad; thus, wholly-owned greenfield (WOGF) investments have a higher likelihood of being divested. Originality/value To the best of the authors’ knowledge, this paper is the first to analyze foreign divestment from multilatinas, accounting for how entry mode strategy and host country institutions may impact these firms’ de-internationalization.

Guest editorial: Multilatinas in the era of uncertainties: a trajectory of different dependencies

“…These studies reveal the dual nature of the regional context: on the one hand, offering local resources and governmental support, and on the other, presenting risks due to macroeconomic instability and social conflicts. This dichotomy leads to a "dependency path" of internationalization, where firms must navigate the complexities of their regional context, which can either enhance or hinder their international performance and asset base, as illustrated by da Fonseca et al (2024).…”