Abstract Foreign direct divestment (FDD) remains underexplored relative to inward foreign direct investment, particularly at the subsidiary and regional levels in small open economies. This study examines foreign subsidiary downsizing and exit in Bulgaria during the post-COVID period, using evidence from 2023 to 2025 and a multiple-case design based on interviews with foreign-invested firms, regional stakeholders, and national institutions. It develops a qualitative, mechanism-based typology of subsidiary exit and identifies four analytically distinct pathways: competitiveness-erosion exit, corporate-strategic reconfiguration exit, shock-activated structural exit, and institutional-confidence exit. These pathways are conceptualized as ideal–typical mechanisms rather than exhaustive empirical categories. The findings show that divestment is not the simple inverse of investment and should not be interpreted uniformly as either market failure or policy failure. Rather, exit decisions reflect different combinations of subsidiary-level competitiveness pressures, headquarters-level portfolio restructuring, disruptive triggering events, and host-country institutional conditions. The analysis further shows that the territorial consequences of FDD are conditional upon regional absorptive capacity, including labor-market depth, supplier diversification, and institutional coordination. The paper contributes a bounded, mechanism-oriented framework for analyzing foreign subsidiary exit in FDI-dependent economies and highlights the policy importance of investment retention, reinvestment support, and regional resilience.
Zhelev et al. (Mon,) studied this question.