Caught in the Crossfire : Dimensions of Vulnerability and Foreign Multinationals' Exit from War-Afflicted Countries

When war occurs in a country, some foreign MNEs stay on, while others flee. We argue that MNE responses to external threats depend on the firm's vulnerability, which we decompose into exposure (proximity to threat), at-risk resources (potential for loss), and resilience (capacity for coping). We test the independent and interactive effects of these dimensions using a geo-referenced sample of 1,162 MNE subsidiaries in 20 war-afflicted countries over 1987–2006. We find that highly valuable resources can become liabilities when exposed to harm, and the best way to cope with external threats may be to exit. Our findings extend the resource based view and real options theory by demonstrating the bounded value of resources and options in the face of environmental contingencies