Unstable Geopolitical Attraction: Volatility of Political Affinity and Subsidiary Investments (with Gilbert Kofi Adarkwah, Christopher Sabel and Flladina Zilja). Conditionally accepted, Strategic Management Journal.
Research summary: Building on prior work that shows that the level of (geo)political affinity in bilateral political relations between countries facilitates multinational investments, we investigate how the volatility of political affinity affects multinational firms’ investments. We argue that the volatility of political affinity, which reflects changing stakeholder pressures in multinationals’ home and host countries, impedes firms’ ability to form expectations about stakeholder behavior and reduces subsequent investments in subsidiaries. We further argue that the effect of volatility of political affinity is less pronounced when the level of political affinity between countries is high and when the multinational company has strong political connections at home. Our analyses examine 1,054 U.S. public firms and their subsidiary investments in 106 countries from 2000 to 2015.
Research summary: Building on prior work that shows that the level of (geo)political affinity in bilateral political relations between countries facilitates multinational investments, we investigate how the volatility of political affinity affects multinational firms’ investments. We argue that the volatility of political affinity, which reflects changing stakeholder pressures in multinationals’ home and host countries, impedes firms’ ability to form expectations about stakeholder behavior and reduces subsequent investments in subsidiaries. We further argue that the effect of volatility of political affinity is less pronounced when the level of political affinity between countries is high and when the multinational company has strong political connections at home. Our analyses examine 1,054 U.S. public firms and their subsidiary investments in 106 countries from 2000 to 2015.
~ More working papers to be added soon ~