Do Managers Behave the Way Theory Suggests? A Choice-Theoretic Examination of Foreign Direct Investment Location Decision-Making

26 Pages Posted: 18 Apr 2011

See all articles by Timothy M. Devinney

Timothy M. Devinney

University of Manchester - Alliance Manchester Business School

Jordan J. Louviere

University of South Australia - Institute for Choice

Date Written: December 2007

Abstract

Many empirical examinations of foreign direct investment location choice have relied on the use of secondary data and surveys on the choices made by firms about the form and location of overseas investment. These studies have two inherent and related problems. First, they rely solely on the location choices made by different firms, and assume that the domains of possible options considered were the same. Second, there is an assumption about the rules used by firms to make these decisions, yet the decisions are made by boundedly rational managers. After reviewing the literature, this study examines managers’ choices about foreign investment location through the use of structured experimentation. The results show that in creating sets of investments to ‘consider’, managers appear to follow fairly rational rules. However, the choice of actual ‘investments’ appears less aligned to traditional models.Journal of International Business Studies (2007) 38, 1069–1094. doi:10.1057/palgrave.jibs.8400311

Suggested Citation

Devinney, Timothy M. and Louviere, Jordan J., Do Managers Behave the Way Theory Suggests? A Choice-Theoretic Examination of Foreign Direct Investment Location Decision-Making (December 2007). Journal of International Business Studies, Vol. 38, Issue 7, pp. 1069-1094, 2007, Available at SSRN: https://ssrn.com/abstract=1811531 or http://dx.doi.org/10.1057/palgrave.jibs.8400311

Timothy M. Devinney

University of Manchester - Alliance Manchester Business School ( email )

Booth Street West
Manchester, M15 6PB
United Kingdom

Jordan J. Louviere

University of South Australia - Institute for Choice ( email )

Level 13
140 Arthur Street
North Sydney, New South Wales 2060
Australia

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