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Journal of Economic Integration 2019 March;34(1) :86-108.
DOI: https://doi.org/10.11130/jei.2019.34.1.086
Does Divestment Risk Evolution of MNE Subsidiaries Display an Inverse U-Shaped Form?

Antonios Georgopoulos Vasilios Sogiakas 

University of Patras, Rio Patras, Greece
The American College of Greece, Athens, Greece
Corresponding Author: Antonios Georgopoulos ,Tel: +302610996139, Email: georgop@upatras.gr
Copyright ©2019 Journal of Economic Integration
ABSTRACT
The current study investigates the evolutionary path of divestment risk of MNE subsidiaries in a regionally integrated area. Although descriptive statistics tend to indicate an inverse U-shaped path of divestment risk for the whole post-war era (1960~2015), including the protectionism period (1960~1980), the Kaplan–Meier survivor curve is monotonically decreasing across the three successive stages of EU integration (1981~2015). Moreover, the econometric findings exhibit that divestment risk stabilization at the deep integration stage is due to investment in product differentiation and human capital and not to factor differentials such as tariffs and wage costs. To our best knowledge, this is the first study that explores the evolution of foreign divestment risk in a gradually increasing integrated environment.

JEL Classification
F15: Economic Integration
F23: Multinational Firms; International Business
Keywords: MNE subsidiary | Economic integration | Greece
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