This study draws on the behavioral theory of the firm to explore the relationship between performance feedback and MNEs’ regionalization of their foreign investments. Based on longitudinal data (2017-2021) from 115 U.S. MNEs in manufacturing industries, the research shows that performance shortfall relative to aspirations in a host country leads to a reduction in intra-regional FDIs, while increasing inter-regional FDIs of MNEs. In addition, this study confirms that the effects of performance below aspirations on intra-regional and inter-regional FDIs both diminish with the level of institutional and economic diversity within a focal region. The findings highlight that feedback learning mechanisms can drive MNEs’ strategic reallocation of investments across regional boundaries.
