Monday, March 11, 2019

Department Seminar Series - Julien Jourdan - PSL Paris Dauphine U - Tuesday, March 26th 2019

The Management Department
Department Seminar Series

Julien Jourdan

PSL- Paris Dauphine U

 Tuesday, March 26th 2019
   Room LE CLUB  at 10:00 am

Theme"Now Serving...Freedom Fries": The Effect of Stigma on the Political Behavior of Foreign Multinational in the United States”

   Abstract: We explore how foreign MNEs strategically respond to political stigmatization, that is, deliberate attempts by government officials at publicly discrediting firms. The documented strategies MNEs may use to mitigate their liability of foreignness, which require sustained effort over time, may not be effective to cope with a sudden rise of hostility in a host country. We predict that MNEs’ responses involve a combination of buffering and bridging corporate political activities. Because stigma makes targeted MNEs undesirable partners to politicians, these firms may increase lobbying expenses in critical issues related to the stigma to buffer their operations from external turbulence, mostly through external lobbyists. Targeted MNEs may also increase donations to political candidates less likely to participate in stigmatization as a way to bridge with more supportive political audiences in the long term. We test and find support for these ideas in a quasi-experiment that exploits the exogenous assignment of political stigmatization to MNEs coming from the United Nations Security Council’s member countries opposing the US-led Iraq invasion in 2003. We estimate differences-in-differences parameters in a sample of 977 different MNEs in 137 different industries, spanning from 1998 to 2007. Our results extend the literature by showing how MNEs respond to sudden increases in liability of foreignness, and by offering a clearer causal mechanism of its effects on MNE political activity. Moreover, differently from previous work on the interaction between social and political strategies that portray politicians as evaluators of firms’ social performance, we show how firms strategically adjust their political strategies when politicians actively seek to damage their sociopolitical capital.