The divestment-reinvestment sequence in foreign countries: The role of relational vs. transactional ownership

In this paper, we claim that ownership is a key determinant of the firms' divestment-reinvestment sequence in foreign country. Building on notion ‘relational vs. transactional ownership’, distinguish between relational-type firms (namely, family-owned and state-owned firms), transactional-type (privately non-family-owned firms). We argue are less likely to both divest from, reinvest in, given fact, relational owners set lower performance threshold intervention than ones; additionally, order turn tide, former often increase resource injection when subsidiary falls below threshold. Such an escalation commitment increases sunk costs further decreases likelihood divesting subsidiary. Moreover, divestment occurs, memory high incurred reduces propensity same host test our conceptual framework large sample investments, divestments subsequent re-entries undertaken period 2000–2015 by 602 Italian firms. Our econometric findings corroborate hypotheses, thus contributing literature interdependencies reinvestment choices, their relationships with corporate ownership.