A Geopolitical Perspective into the Opposition to Globalizing State‐Owned Enterprises in Target States

Abstract

Plain language summary Geopolitical concerns are one of the important factors influencing multinational enterprise (MNE) location choices. This is particularly true for globalizing state‐owned enterprises (SOEs) because of their direct ties with governments. Because of geopolitical concerns, SOEs may face a strong level of opposition in foreign countries which neighbor SOEs’ home countries, have different religious beliefs and political regimes from SOEs’ home countries or countries do not lack resources that SOEs can provide. Such opposition is particularly strong in countries where domestic politicians find it in their interests to arouse nationalistic feelings and oppose foreign SOEs’ investments. This study highlights the importance of considering geopolitical factors in MNE location choices. Technical summary The emergence of globalizing state‐owned enterprises (SOEs) requires revisiting the assumption that multinational enterprises (MNEs) are focused on economic not political objectives because SOEs tend to be perceived as political entities as well. We develop a geopolitical perspective into how geographic distance, religious similarity, and political regime similarity between two nation states, as well as resource complementarity between globalizing SOEs and target states, explain the level of opposition that globalizing SOEs face in target states. We also investigate how the salience of nationalist politics moderates the influence of these geopolitical factors on the level of opposition that globalizing SOEs face. This theoretical model developed in this study sheds new light on understanding the role of geopolitics in affecting MNEs’ location choices. Copyright © 2016 Strategic Management Society.

The autocratic advantage: Internationalization of state-owned multinationals

“…The results largely confirm the hypotheses and show that the political regime of the home country plays a key role in international acquisition propensity. The findings on SOMNC acquisitions between autocratic economies resonates with earlier work on investments between countries with similar institutions (Shi, Hoskisson & Zhang, 2016;Xu & Shenkar, 2002), while the findings on industry focus point towards the employment of a strategic approach by the autocratic government to strengthen its international position within a specific industry. Overall, these insights add to our understanding of why home country governments are disposed, and when they are most disposed, to promote SOEs internationalisation and their transformation into SOMNCs.…”

State ownership and securities fraud: A political governance perspective

“…Generating economic profits is often not the sole or most important responsibility of SOE managers as these firms shoulder the governance function of preserving social and political stability (Shi, Hoskisson, & Zhang, 2016). This explains why CEOs of SOEs are less likely to be dismissed due to weak financial returns (Kato & Long, 2006) and may receive poor evaluations from the state if SOEs that they lead fail to fulfill political and social objectives (Du et al, 2012).…”

Navigating geographic and cultural distances in international expansion: The paradoxical roles of firm size, age, and ownership

“…Third, our study contributes to the research examining the roles of firm size, firm age, and state ownership in firm internationalization. The existing FDI research has examined how firm size, age, and state ownership influence the international strategies of firms and the unique challenges they face in international expansion (Carr et al, 2010;Cuervo-Cazurra et al, 2014;Fuentelsaz et al, 2002;Shi et al, 2016). This research has suggested that larger firms tend to pursue international expansion (Fuentelsaz et al, 2002;Hitt, Hoskisson, & Ireland, 1994) and younger firms can achieve higher short-term growth subsequent to international expansion (Carr et al, 2010).…”