The exit advantage: Overcoming barriers to national exit

Abstract

When a firm is engaged in relocationary foreign direct investment (FDI) as part of an offshoring strategy, it offsets its investment in the host nation with a divestment outside it. FDI is viable only if a firm possesses an ownership advantage to counter barriers to national market entry, but if the offshoring firm needs to overcome barriers to national market exit it must possess an unidentified advantage analogous to, yet distinct from, the ownership advantage. This study attempts to determine how national exit barriers impact on a firm's reported probability of undertaking RFDI, using an ordinal regression analysis of online survey data specifically collected for the purpose. Results suggest political and strategic exit barriers from the origin nation are significant inhibitors to offshoring. The implications of this finding are discussed.