International Business Review

This paper examines the interdependencies between MNE investment and divestment decisions. We derive a conceptual framework of “segmented intersubsidiary competition” and hypothesize that the competitive pressure of new investments on existing subsidiaries varies by regional dimension. Based on a database of 3524 French MNEs, we analyse intersubsidiary competition and intertemporal adjustment processes of the investment-divestment relationship between 2002 and 2010. Our empirical findings support the theoretical notion of segmented intersubsidiary competition within MNEs: Foreign investments create competitive pressure for foreign subsidiaries to be divested in subsequent periods, where domestic investments spur divestment at home. Inversely, foreign divestments are more likely to create new investment opportunities in the foreign than in the domestic arena. Our differentiations between investments/divestments in EU countries and in non-EU countries shows that the competitive pressure of new investments on existing subsidiaries is mainly limited to the same region.