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Why Do Some Multinational Firms Respond Better Than Others to the Hostility of Host Governments? Proximal Embedding and the Side Effects of Local Partnerships
Author(s) -
Moschieri Caterina,
Ravasi Davide,
Huy Quy
Publication year - 2024
Publication title -
journal of management studies
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 4.398
H-Index - 184
eISSN - 1467-6486
pISSN - 0022-2380
DOI - 10.1111/joms.12809
Subject(s) - nonmarket forces , multinational corporation , hostility , business , liability , sophistication , economics , market economy , finance , social psychology , sociology , psychology , factor market , social science
Using a multiple‐case study of alleged expropriations reported before the World Bank, we examine how multinational companies (MNC) react to the escalating hostility of host governments. Our study reveals how different choices regarding the interaction with local nonmarket stakeholders – which we refer to as proximal vs. mediated embedding – shape how managers respond to these disputes by affecting their ability to collect, process and interpret information, and to act upon it in a way that effectively mobilizes local and international support. In contrast to the prevailing view that local partners in international joint ventures shelter MNCs from abuse from political authorities, our findings show that primary reliance on local partners to manage the local nonmarket environment can actually reinforce a liability of outsidership and even create a ‘liability of insidership’, to the extent that relying on local partners prevents the MNC from establishing quality connections with a broad range of nonmarket stakeholders, reducing its alertness and responsiveness to hostile acts from host governments.

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