Stigma Avoidance and the Delay of Foreign Exitsof Emerging Economy Multinational Enterprises

Authors

ผศ.ดร.เกียรติชัย กาฬสินธุ์, Mr.Klaus E. Meyer Klaus E. Meyer

Published

78th Annual Meeting of the Academy of Management

Abstract

When a foreign subsidiary fails to meet expectations, how quickly will investors pull the plug and withdraw? We argue that the phenomenon of stigma avoidance induces some types of emerging market multinational enterprises to delay divestments of foreign operations. Specifically, we argue that the risk of a stigma of failure creates pressures on managers to retain a business, even at the expense of profitability. Integrating the concept of stigma with institutional theory, we explore variations across firms in different ownership types. A stigma of failure is more likely to be damaging to managers in state-controlled firms (compared to private enterprises) and in family firms (compared to individual-controlled firms). In these types of firms, the impact of stigma avoidance is magnified by ownership concentration, status awareness of the chief executive officer (CEO), and the importance of status in the national culture.

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