Environment, Marketing Strategy, Performance, and International Exit: Why and How They Are Connected
——A Study on International Exit in the Chinese Outward Foreign Direct Investment (OFDI) Context

Abstract

Although research on foreign market entry and expansion behaviour has attracted significant interest in the literature, there is a general lack of research (both conceptual and empirical) on the exit behaviour of Foreign Direct Investment (FDI) firms. To address this issue, the current study develops a conceptual framework by extending the Environment-Strategy-Performance (ESP) paradigm to include the exit decision as a consequence of current performance. This thesis draws notions from various theories including the ESP paradigm, fit theory, dynamic capabilities (DC) theory, and the theory of competitive advantage. The objective is to take an initial step towards reducing the discrepancy between previous conceptual research and empirical research on exit, by developing a conceptual framework and empirically examining it in the context of Chinese Outward Foreign Direct Investment (OFDI). It also aims to lay the conceptual foundation for subsequent empirical research on international marketing and international exit. Several research hypotheses are advanced and tested using questionnaire survey data. The main research results show that both dissatisfactory performance of a foreign affiliate, and the internal strategic misfit between a foreign affiliate and its headquarters are important triggers of the exit decision. However, when the moderating role of a foreign affiliate’s marketing capabilities is considered, the impact of strategic misfit on the exit decision becomes not significant, whereas the influence of dissatisfactory performance on the exit decision remains significant. The research results have generated new insights into both international marketing strategy and international exit behaviour. Implications for both headquarters’ managers and foreign affiliates’ managers are also discussed.