The role of endogenous and exogenous risk in FDI entry choices
FDI research has presented consistent evidence that firm experience moderates the effect of risk on entry in a new foreign market. This conclusion is contested by recent research. By revisiting the conceptualisation of risk by economists and behaviourists, we show that the proposed learning mechanis...
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| Main Authors: | , , , |
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| Format: | text |
| Language: | English |
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Institutional Knowledge at Singapore Management University
2020
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| Subjects: | |
| Online Access: | https://ink.library.smu.edu.sg/lkcsb_research/7212 https://ink.library.smu.edu.sg/context/lkcsb_research/article/8211/viewcontent/ENDOGENOUS_and_EXOGENOUS_RISK_v2019_08_31_v2.pdf |
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| Institution: | Singapore Management University |
| Language: | English |
| Summary: | FDI research has presented consistent evidence that firm experience moderates the effect of risk on entry in a new foreign market. This conclusion is contested by recent research. By revisiting the conceptualisation of risk by economists and behaviourists, we show that the proposed learning mechanism only applies to endogenous risk, not exogenous risk. As assessing endogenous risk involves self-evaluation of risk-reducing capability, it is posited that firms have differential tendencies to take such risks even when experience and ownership are accounted for. We find both observed and unobserved variations in firms' responses to endogenous risk, as opposed to exogenous risk. |
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