Exit from a foreign market: Do poor performance, strategic fit, cultural distance, and international experience matter?

Abstract

Although research on international entry and expansion has been a particularly important topic in the literature, there has been little effort seeking to explain firms' exit decisions from foreign markets. Based on the notion of fit theory together with moderation contingent logic, this study investigates the effects of both international performance, internal strategic fit, and the moderating impact of cultural distance and international experience on the firm's exit decision. The results indicate that strategic misfit and poor international performance have a detrimental effect on the firm's survival in the foreign market. Furthermore, they suggest that cultural distance moderates the impact of the internal strategic fit and international performance on the exit decision. In addition, a significant three-way interaction was found between international performance, cultural distance, and international experience. Based on data collected from multiple informants in Chinese outward foreign direct investment firms, this study generates new insights for academics and practitioners.