Foreign direct investment location choice of small- and medium-sized enterprises: The risk of value erosion of firm-specific resources

• Drawing on the RBV, we contribute to the literature of SMEs FDI location choice.
• SMEs’ resources moderate the relationship between motives and FDI location choice.
• Transfer of resources to foreign locations is bounded to risk of value erosion.
• Risk-inflating resources (knowledge intensity) drive FDI into developed countries.
• Risk-reducing resources (international experience) drive FDI into developing countries.

Drawing on the resource-based view and FDI theory, the present study introduces the risk of value erosion as a core concept to explain the moderating effect of SMEs’ resources (knowledge intensity and international experience) on the relationship between motives (market seeking, resource seeking, strategic asset seeking) and FDI location choice (developed countries vs. developing countries). Testing our theoretical predictions on survey data obtained from 100 German SMEs, our results indicate that knowledge intensity and international experience significantly influence the relationship between motives and SMEs’ FDI location choice. Adding this perspective, we provide an enhanced understanding of SMEs’ FDI location choice and beyond.