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Why and when performance surplus affects executives’ trade-off between exploratory and exploitative OFDI: evidence from China

Xi Zhong,Weihong Chen,Ge Ren

Published 2025 in Chinese Management Studies

ABSTRACT

On the basis of the behavioral theory of the firm, this study aim to analyze the influence of historical and social performance surpluses on executives’ trade-off between exploratory and exploitative outward foreign direct investment (OFDI). The authors use China’s A-share listed companies from 2002 to 2022 as the research sample; on this basis, the authors conduct empirical tests to determine the credibility of the proposed theoretical views. Using data on Chinese A-share listed companies, the authors find that when faced with a historical performance surplus, executives prefer exploitative OFDI to exploratory OFDI. In contrast, when faced with a social performance surplus, executives prefer exploratory OFDI to exploitative OFDI. Moreover, the authors find that these relationships are enhanced by economic policy uncertainty. First, the authors propose and demonstrate that historical performance surplus and social performance surplus are two important but underexplored antecedents of executives’ trade-offs between exploratory OFDI and exploitative OFDI. Second, the authors add new insights into how executives can adjust OFDI when faced with performance surpluses. Finally, the authors clarify for the first time the moderating role of economic policy uncertainty in the relationship between performance feedback and firms’ OFDI actions.

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