Surviving the Arab Spring: socially beneficial product portfolios and resilience to political shock

Abstract

Purpose This paper aims to explore the ideas that social legitimacy (acceptance by the public within a country) serves as a hedge against political risk and that the perceived social value of Multinational Enterprises (MNEs’) products or services improves firms’ social legitimacy and so resilience to political shock. Design/methodology/approach Drawing from a unique data concerning global construction activity and taking advantage of the Arab Spring as an exogenous, political shock, this paper teases out the relative effects of pre-shock experience and product/service emphasis. Findings The authors find that construction firms that worked on a higher proportion of socially beneficial projects – such as water infrastructure, transportation and telecommunications – recovered more quickly from political shock than did those that worked on projects primarily for manufacturing interests or the oil industry. The authors also find that deep experience in a country had no bearing on a firm’s ability to recover from political shock. Originality/value The findings suggest that market behaviors that enhance social legitimacy also enhance MNEs’ ability to survive in volatile political settings. These insights add to the political risk and nonmarket strategy literatures the idea that market strategies that are attentive to nonmarket strategic goals are an important addition to the toolkit for managing political risk. More specifically, when it comes to surviving political shock, pre-shock emphasis on socially beneficial products seems to create a social legitimacy buffer that enhances resilience more than do deep country experience and associated social and political ties with the political elite.

Taking advantage of institutional weakness? Political stability and foreign subsidiary survival in primary industries

“…Heightened political risk creates an unpredictable business environment characterized by large and abrupt changes in taxation, contract law, policies on expropriation, and other legal mechanisms, which in turn leads to higher contracting costs (i.e. negotiation, monitoring, and enforcement costs) (Crowley and Loviscek, 2002;Darendeli et al, 2020). International business scholars have relied on transaction cost arguments for location choice and entry mode studies, generally finding that lower transaction costs are favored and that higher ownership by the MNE is the preferred method for reducing transaction costs (Delios and Beamish, 2001;Demirbag et al, 2011).…”

Open for business in a closed world? Managing MNE nonmarket strategy in times of populism and geopolitical uncertainty

“…However, we argue that there needs to be a further broadening and deepening of our conceptual lenses and greater empirical investigation of these avenues of research to remain relevant and contribute to today's discourse in international business and management research. For instance, the nature of how firms managed the Arab spring, captured in this special issue by Darendeli et al (2021), paves the way for future research trajectories on employing nonmarket strategies to defend competitive advantage. Specifically, how can legitimacy and resilience be employed within nonmarket strategies to mitigate populism and related political risk?…”

L’impact de la fragilité de l’État sur les IDE entrants: Le rôle modérateur des ressources naturelles et de la gouvernance démocratique dans la région MENA

“…Le « Printemps arabe » « fait référence à une année de troubles inattendues et intenses, depuis son explosion le 17 décembre 2010 en Tunisie jusqu’aux premiers mois de 2012, au cours de laquelle la plupart des pays de la région MENA ont connu d’importants bouleversements » (Darendeli et al., 2020, p. 7). Il est à noter que rares sont les études qui se sont intéressées à l’analyse des conséquences de ces soulèvements populaires sur les IDE entrants dans les pays MENA (Burger et al.…”