Surviving under Pressure: Multinational Firms’ Strategy in International Tension

• In Event: Poster Session: International Political Economy 1 & Migration and Citizenship
  In Poster Session: Poster Session: International Political Economy 1

Abstract

The era of global integration has provided multinational corporations (MNCs) with opportunities to engage in economic and political activities abroad. However, in today’s interconnected world, these corporations are susceptible to the influence of cross-national tensions. As pivotal political and social players, the decisions made by MNCs in global markets go beyond conventional business considerations, meriting scrutiny from political scientists. I address the necessity for a comprehensive theory on firms navigating the global landscape by asking: What strategies do MNCs employ to survive international tensions?

Existing literature has highlighted several strategies employed by MNCs to navigate global tensions, but we have not fully understood the extent to which home country support may aid MNCs in these tensions. Scholars have also yet fully explored the rationale of different forms of backing their firms, particularly during tensions and risks. In this project, I focus on the role of home governments to their MNCs when they are facing challenges abroad. I closely examine the variations of home regime characteristics in expressing their support, as well as how firms may rely on their unique strengths to garner support.

The independent variable is global tensions, and I will target tensions between the United States and other countries that are home to non-U.S. MNCs. To measure global tensions, I will compile geocoded data since 1979 from the Global Data on Events, Location, and Tone dataset. To measure the dependent variable – home country support, I will use web scraping to gather data on state media announcements, government subsidies, contract agreements, and the speed of processing patent applications involving MNCs for MNCs in each home country. Retaliatory announcements from state media, higher subsidies, increased government contracts, and expedited patent processing times will serve as indicators of strong home country support over corporations.

I argue that home countries that are U.S. rivals will be more likely to take high-profile, assertive countermeasures (e.g., direct retaliation and bluffing on state media), due to concerns about leadership legitimacy from the public. By contrast, home countries that are not direct competitors to the United States may resort to low-profile approaches (e.g., close-door negotiations or benefit exchanges) to support their firms during tensions. Furthermore, firms operating in key industries, such as information communications technology, and firms with strong “revolving door” connections, will be more likely to obtain home state support when facing global tensions. At the domestic level, interest groups influence the regulatory processes and garner support from home governments through diverse channels, utilizing both their structural and instrumental power and cultivating political connections. Empirically, I will use mixed methods, including large-N statistical analyses, process tracing, and text analysis, to test these propositions.

This research contains theoretical and empirical contribution in four aspects. First, it brings international investment back to re-ruminate how domestic institutions can be affected by external forces. Second, this paper offers insights into the state-business relationship in developing countries. I re-emphasize firms as important domestic and international political actors in navigating global risks and tensions. Third, the unique focus on the information communications technology industry advances our understanding of the sectoral heterogeneity of firms’ political strategies. Finally, the special attention to Chinese technology companies investing in the United States may shed some light on the ongoing trade and technology tensions between the two major powers.

Author

• Yue Lin, University of California, Berkeley