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CONSEQUENCES OF MULTINATIONALS’ FORCED FOREIGN DIVESTMENTS
Abstract: We study the consequences of multinational firms’ forced divestments from a host country. Most studies of international divestments examine firms that divest from a host country because they fail to achieve their strategic goals or profitability. We complement this approach by analyzing firms being forced to divest due to geopolitical conflicts. Building on transaction cost economics theory and the analysis of 29 forced divestments from Myanmar, we propose a conceptual process framework to understand post-exit consequences for multinationals, identifying the drivers, moderators, and consequences of forced divestment. The findings reveal four types of forced divestments (pressured, conflicted, strategic, and principled) and four moderating conditions (capital intensity, sensitive technology, labor intensity, and investment lifecycle stage) that shape the magnitude of divestment costs and temporal patterns. The study provides a novel and nuanced understanding of how home countries generate transaction costs in host country operations, how asset specificity creates heterogeneous exit profiles, and how geopolitical disruptions create contexts where cost optimization becomes impossible, extending TCE.
Keywords: forced divestment, exit, sanctions, multinationals, global strategy, geopolitics, transaction cost economics
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