Behavioral elements in foreign direct investments

The success of multinational enterprises (MNEs) is at least as much a function of management ability and behavior as it is of industry characteristics or environmental factors. MNE managers, like all managers, display human limitations, e.g., overconfidence that affect judgment. Yet IB researchers still tend to ignore management in their research, treating the firm as a black box. To the extent that the top management team is considered, rational behavior in the classical economic sense is assumed, yet, clearly, managers behave according to different rules than those assumed in much of the IB literature. Further, managers are not part of a herd, but unique. The result of such a lacuna is that theory fails to predict actual behavior and does not allow best guidance for policy options. The paper summarizes research on behavioral decision making and calls for its application in future research in international business.