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.
