Behavioral Elements in Foreign Direct Investment Decisions

Abstract

The success of multinational enterprises (MNEs) is at least as much a function of management ability and behavior as it is of industry characteristics or environmental factors. These managers display human limitations that affect judgment. Yet International business (IB) researchers tend to ignore management in their research, treating the firm as a black box. To the extent top management team (TMT) is considered, rational behavior in classical economic sense is assumed. Behavioral elements were studied by others in different fields. Clearly, managers behave according to different rules than those assumed in much of the IB literature. Further, managers are not part of a herd but unique. The result of such a lacuna is that theory fails to predict actual behavior and does not allow best guidance for policy options. The chapter summarizes research on behavioral decision making and calls for its application in future research in international business.

Citation

Aharoni, Y. (2011), "Behavioral Elements in Foreign Direct Investment Decisions", Ramamurti, R. and Hashai, N. (Ed.) The Future of Foreign Direct Investment and the Multinational Enterprise (Research in Global Strategic Management, Vol. 15), Emerald Group Publishing Limited, Leeds, pp. 23-60. https://doi.org/10.1108/S1064-4857(2011)0000015008