Divestment of foreign production operations

This study investigates some determinants fo the divestment of foreign manufacturing operations by Norwegian companies. To date, very few studies have taken a closer look at what might influence whether foreign subsidiaries are divested or not. Although foreign direct investment – in principle – represent long-term commitments to foreign manufacturing operations, divestments are in fact quite common. This study shows that more than half of a sample of foreig subsidiaries woned by Norwegian companies in 1982 wee divested within a period of ten years. The empirical findings indicate that foreign divestment is inversely related to economic growth in the host country, and that the propensity to divest is significantly higher for subsidiaries that had been acquired than for greenfield establishments. Also, related (horizontal) subsidiaries are less likely to be divested than unrelated (non-horizontal)subsidiaries.