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NTU Management Review Vol. 34 No. 3 Dec. 2024




                                                3. Findings


                   The research findings indicate that when the investments of firms in China are
               profitable, a U-shaped association exists between investment performance and divestiture

               decisions. That is, when profits increase, the likelihood of divestment initially increases
               but subsequently decreases. However, when firms incur losses in their investments in
               China, they are less likely to divest.
                   Furthermore, the present study develops a performance model for 479 observations of

               divestiture events, and its results indicate that divesting from China is positively associated
               with market performance.
                   Finally, the prominent presence of correction factors and decision errors helps
               achieve the goal of controlling for selection bias in the analysis.



                              4. Implications and Research Limitations


                   The level of uncertainty in a host country is closely associated with its political

               and economic environments and its labor market. In the case of China, changes in the
               country’s political and economic environments and its labor market regulations can be
               used as breakpoints for conducting comparative research on entry and exit decisions across
               multiple time periods.

                   Furthermore, the present study employs quantitative research to investigate the
               association between divestiture decisions and investment performance in China. We
               employ the two-stage least squares method to address endogeneity-related problems
               (Heckman, 1979). However, various endogeneity-related problems stem from

               unobservable factors that can influence divestment strategies and can therefore be
               attributed to an error term. This phenomenon leads to correlations between explanatory
               variables and the error term. Various factors, such as the international division of labor, the
               effects of supply chains, and the influence of decisions made by other firms may contribute
               to this issue. Hence, qualitative research can be conducted to further explore these aspects

               to further clarify the practical implications of the present findings.







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