The evolution of emerging market firms and time until subsidiary exit: Competitive dynamics of domestic market followers and contingency factors

Abstract

The literature has tended to overlook the great divergence in the competitive dynamics of firms in emerging economies. Drawing on the strategic competitive dynamics literature and prospect theory, this article aims to deepen our understanding of the competitive dynamics among firms in emerging economies and how the dissatisfaction of dominated firms with their domestic position affect foreign subsidiary exit time. Using hazard models with an accelerated failure time (AFT) specification, we investigate the impact of a firm's domestic market position on subsidiary exit time using a longitudinal sample of 6,651 subsidiary-year observations and 735 subsidiary exits of 296 South Korean parent firms with international operations in 64 countries over a 27-year span (1990–2016). The empirical results suggest that the domestic market position affects the risk-taking orientation of dominated firms and plays a critical role in the internationalization of firms in emerging economies. Specifically, dominated firms, compared to dominant firms, have some advantages when investing abroad, notably in less-developed countries. © 2022