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Closure and Divestiture By Foreign Entrants: The Impact of Entry and Post-Entry Strategies

José Mata
Publication Year 
JEL Code 
L11 - Production, Pricing, and Market Structure; Size Distribution of Firms
L60 - General
We analyze the longevity of foreign entrants explicitly considering two possible ways of exit: firm closure and capital divestiture. We find that entry and post-entry strategies affect the longevity of firms and of foreign equity holdings, but in different manners. While the ownership arrangements and organizational structure affect the likelihood of divestment, they exert no significant effect upon closure. The entry mode exerts opposite effects on the two modes of exit, greenfield entrants being more likely to shutdown, but less likely to be divested. Only human capital affects closure and divestment in the same manner. Firms with large endowments of human capital are less likely to exit, irrespective of the exit mode considered.
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