IDEAS home Printed from https://ideas.repec.org/a/eee/worbus/v55y2020i2s1090951618306588.html
   My bibliography  Save this article

Multinational enterprises’ risk mitigation strategies in emerging markets: A political coalition perspective

Author

Listed:
  • Zhu, Ying
  • Sardana, Deepak

Abstract

This paper contributes to the IB literature by investigating MNEs’ risk mitigation strategies in emerging markets. Drawing on institutional perspectives and March’s theoretical concept of forming a ‘political coalition’, we propose that risk mitigation cannot be limited to passive compliance and/or demonstrating good corporate behavior, but should extend to collective efforts by building a political coalition and working with key stakeholders to manage potential risk and obtain favorable outcomes in complex institutional environments. In considering MNEs in contemporary China and India, we offer different types of risk mitigation strategies under various institutional contexts and a framework for future research.

Suggested Citation

  • Zhu, Ying & Sardana, Deepak, 2020. "Multinational enterprises’ risk mitigation strategies in emerging markets: A political coalition perspective," Journal of World Business, Elsevier, vol. 55(2).
    • Handle: RePEc:eee:worbus:v:55:y:2020:i:2:s1090951618306588
    DOI: 10.1016/j.jwb.2019.101044
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S1090951618306588
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.jwb.2019.101044?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Erasmo Giambona & John R Graham & Campbell R Harvey, 2017. "The management of political risk," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 48(4), pages 523-533, May.
    2. Laurent L Jacque, 1981. "Management of Foreign Exchange Risk: A Review Article," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 12(1), pages 81-101, March.
    3. Chari, Murali D.R. & Banalieva, Elitsa R., 2015. "How do pro-market reforms impact firm profitability? The case of India under reform," Journal of World Business, Elsevier, vol. 50(2), pages 357-367.
    4. Guy L. F. Holburn & Bennet A. Zelner, 2010. "Political capabilities, policy risk, and international investment strategy: evidence from the global electric power generation industry," Strategic Management Journal, Wiley Blackwell, vol. 31(12), pages 1290-1315, December.
    5. Narjess Boubakri & Sattar A Mansi & Walid Saffar, 2013. "Political institutions, connectedness, and corporate risk-taking," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 44(3), pages 195-215, April.
    6. Jongmooo Jay Choi, 1989. "Diversification, Exchange Risks and Corporate International Investment," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 20(1), pages 145-155, March.
    7. Srividya Jandhyala & Robert J Weiner, 2014. "Institutions sans frontières: International agreements and foreign investment," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 45(6), pages 649-669, August.
    8. Kent D Miller, 1992. "A Framework for Integrated Risk Management in International Business," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 23(2), pages 311-331, June.
    9. K Skylar Powell, 2014. "From M–P to MA–P: Multinationality alignment and performance," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 45(2), pages 211-226, February.
    10. Luo, Yadong, 2007. "From foreign investors to strategic insiders: Shifting parameters, prescriptions and paradigms for MNCs in China," Journal of World Business, Elsevier, vol. 42(1), pages 14-34, March.
    11. Fernández-Méndez, Laura & García-Canal, Esteban & Guillén, Mauro F., 2018. "Domestic political connections and international expansion: It's not only ‘who you know’ that matters," Journal of World Business, Elsevier, vol. 53(5), pages 695-711.
    12. Geert Bekaert & Campbell R Harvey & Christian T Lundblad & Stephan Siegel, 2014. "Political risk spreads," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 45(4), pages 471-493, May.
    13. Jiangyong Lu & Xiaohui Liu & Mike Wright & Igor Filatotchev, 2014. "International experience and FDI location choices of Chinese firms: The moderating effects of home country government support and host country institutions," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 45(4), pages 428-449, May.
    14. Andreas Klinke & Ortwin Renn, 2002. "A New Approach to Risk Evaluation and Management: Risk‐Based, Precaution‐Based, and Discourse‐Based Strategies," Risk Analysis, John Wiley & Sons, vol. 22(6), pages 1071-1094, December.
    15. Chuck C Y Kwok & David M Reeb, 2000. "Internationalization and Firm Risk: An Upstream-Downstream Hypothesis," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 31(4), pages 611-629, December.
    16. Witold J Henisz & Edward D Mansfield & Mary Ann Von Glinow, 2010. "Conflict, security, and political risk: International business in challenging times," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 41(5), pages 759-764, June.
    17. Grosman, Anna & Aguilera, Ruth V. & Wright, Mike, 2019. "Lost in translation? Corporate governance, independent boards and blockholder appropriation," Journal of World Business, Elsevier, vol. 54(4), pages 258-272.
    18. Alvaro Cuervo-Cazurra & Andrew Inkpen & Aldo Musacchio & Kannan Ramaswamy, 2014. "Governments as owners: State-owned multinational companies," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 45(8), pages 919-942, October.
    19. Desbordes, Rodolphe, 2007. "The sensitivity of U.S. multinational enterprises to political and macroeconomic uncertainty: A sectoral analysis," International Business Review, Elsevier, vol. 16(6), pages 732-750, December.
    20. Johann Peter Murmann & Deepak Sardana, 2013. "Successful entrepreneurs minimize risk," Australian Journal of Management, Australian School of Business, vol. 38(1), pages 191-215, April.
    21. Brown, Christopher L. & Cavusgil, S. Tamer & Lord, A. Wayne, 2015. "Country-risk measurement and analysis: A new conceptualization and managerial tool," International Business Review, Elsevier, vol. 24(2), pages 246-265.
    22. Esteban García‐Canal & Mauro F. Guillén, 2008. "Risk and the strategy of foreign location choice in regulated industries," Strategic Management Journal, Wiley Blackwell, vol. 29(10), pages 1097-1115, October.
    23. John A Doukas & Ozgur B Kan, 2006. "Does global diversification destroy firm value?," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 37(3), pages 352-371, May.
    24. Gamso, Jonas & Nelson, Roy C., 2019. "Does partnering with the World Bank shield investors from political risks in less developed countries?," Journal of World Business, Elsevier, vol. 54(5), pages 1-1.
    25. Tony W Tong & Jeffrey J Reuer, 2007. "Real options in multinational corporations: organizational challenges and risk implications," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 38(2), pages 215-230, March.
    26. Shang-Jin Wei & Zhuan Xie & Xiaobo Zhang, 2017. "From "Made in China" to "Innovated in China": Necessity, Prospect, and Challenges," Journal of Economic Perspectives, American Economic Association, vol. 31(1), pages 49-70, Winter.
    27. Sumantra Ghoshal, 1987. "Global strategy: An organizing framework," Strategic Management Journal, Wiley Blackwell, vol. 8(5), pages 425-440, September.
    28. Kirt C Butler & Domingo Castelo Joaquin, 1998. "A note on political risk and the required return on foreign direct investment," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 29(3), pages 599-607, September.
    29. Buckley, Peter J., 2016. "The contribution of internalisation theory to international business: New realities and unanswered questions," Journal of World Business, Elsevier, vol. 51(1), pages 74-82.
    30. Raveendra N Batra & Shabtai Donnenfeld & Josef Hadar, 1982. "Hedging Behavior by Multinational Firms," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 13(3), pages 59-70, September.
    31. Allen Michel & Israel Shaked, 1986. "Multinational Corporations vs Domestic Corporations: Financial Performance and Characteristics," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 17(3), pages 89-100, September.
    32. John M. Luiz & Meshal Ruplal, 2013. "Foreign Direct Investment, Institutional Voids, and the Internationalization of Mining Companies into Africa," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 49(4), pages 113-129, July.
    33. Klaus E. Meyer & Saul Estrin & Sumon Kumar Bhaumik & Mike W. Peng, 2009. "Institutions, resources, and entry strategies in emerging economies," Strategic Management Journal, Wiley Blackwell, vol. 30(1), pages 61-80, January.
    34. Dunning, John H., 2000. "The eclectic paradigm as an envelope for economic and business theories of MNE activity," International Business Review, Elsevier, vol. 9(2), pages 163-190, April.
    35. Thomas P. Murtha & Stefanie Ann Lenway, 1994. "Country capabilities and the strategic state: How national political institutions affect multinational Corporations' Strategies," Strategic Management Journal, Wiley Blackwell, vol. 15(S2), pages 113-129, June.
    36. Figueira-de-Lemos, Francisco & Johanson, Jan & Vahlne, Jan-Erik, 2011. "Risk management in the internationalization process of the firm: A note on the Uppsala model," Journal of World Business, Elsevier, vol. 46(2), pages 143-153, April.
    37. Lewis, Yimai & Bozos, Konstantinos, 2019. "Mitigating post-acquisition risk: the interplay of cross-border uncertainties," Journal of World Business, Elsevier, vol. 54(5), pages 1-1.
    38. Liang Shao & Chuck C Y Kwok & Ran Zhang, 2013. "National culture and corporate investment," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 44(7), pages 745-763, September.
    39. Henisz, Witold J, 2000. "The Institutional Environment for Multinational Investment," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 16(2), pages 334-364, October.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Benischke, Mirko H. & Guldiken, Orhun & Doh, Jonathan P. & Martin, Geoffrey & Zhang, Yanze, 2022. "Towards a behavioral theory of MNC response to political risk and uncertainty: The role of CEO wealth at risk," Journal of World Business, Elsevier, vol. 57(1).
    2. Caraiman Adrian-Cosmin & Mates Dorel, 2020. "Risk management in corporate governance," Proceedings of the International Conference on Business Excellence, Sciendo, vol. 14(1), pages 182-201, July.
    3. Lee, Hyoungjin & Chung, Chris Changwha, 2022. "Go small or go home: Operational exposure to violent conflicts and foreign subsidiary exit," Journal of World Business, Elsevier, vol. 57(6).
    4. Mukherjee, Debmalya & Kumar, Satish & Mukherjee, Deepraj & Goyal, Kirti, 2022. "Mapping five decades of international business and management research on India: A bibliometric analysis and future directions," Journal of Business Research, Elsevier, vol. 145(C), pages 864-891.
    5. Murod Aliyev & Timothy Devinney & Andrew Ferguson & Peter Lam, 2024. "Political discretion and risk: the Fukushima nuclear disaster, the distribution of global operations, and uranium company valuation," Industrial and Corporate Change, Oxford University Press and the Associazione ICC, vol. 33(3), pages 738-761.
    6. Cavusgil, S. Tamer & Deligonul, Seyda & Ghauri, Pervez N. & Bamiatzi, Vassiliki & Park, Byung Il & Mellahi, Kamel, 2020. "Risk in international business and its mitigation," Journal of World Business, Elsevier, vol. 55(2).
    7. Zhu, Ying & Sardana, Deepak & Tang, Ryan, 2022. "Heterogeneity in OFDI by EMNEs: Drivers and trends of Chinese and Indian firms," International Business Review, Elsevier, vol. 31(6).
    8. Hengbin Yin & Muhammad Mohsin & Luyao Zhang & Chong Qian & Yan Cai, 2022. "Accessing the Impact of FDI Goals on Risk Management Strategy and Management Performance in the Digital Era: A Case Study of SMEs in China," Sustainability, MDPI, vol. 14(22), pages 1-20, November.
    9. Andrei Panibratov & Ramsés A. Sánchez Herrera & Alvar Castello Esquerdo & Daria Klishevich, 2023. "Surviving populism: A corporate political activity approach in Mexico," Journal of International Business Policy, Palgrave Macmillan, vol. 6(2), pages 182-200, June.
    10. Röell, Christiaan & Osabutey, Ellis & Rodgers, Peter & Arndt, Felix & Khan, Zaheer & Tarba, Shlomo, 2022. "Managing socio-political risk at the subnational level: Lessons from MNE subsidiaries in Indonesia," Journal of World Business, Elsevier, vol. 57(3).
    11. Athreye, Suma & Saeed, Abubakr & Baloch, Muhammad Saad, 2021. "Financial crisis of 2008 and outward foreign investments from China and India," Journal of World Business, Elsevier, vol. 56(3).
    12. Khan, Zaheer & Amankwah-Amoah, Joseph & Lew, Yong Kyu & Puthusserry, Pushyarag & Czinkota, Michael, 2022. "Strategic ambidexterity and its performance implications for emerging economies multinationals," International Business Review, Elsevier, vol. 31(3).
    13. Alaydi, Sharif & Buck, Trevor & Tang, Yee Kwan, 2021. "Strategic responses to extreme institutional challenges: An MNE case study in the Palestinian mobile phone sector," International Business Review, Elsevier, vol. 30(3).
    14. Adrian-Cosmin Caraiman, 2020. "The Risk Management in Financing Decisions in Corporate Governance," Ovidius University Annals, Economic Sciences Series, Ovidius University of Constantza, Faculty of Economic Sciences, vol. 0(1), pages 859-865, August.
    15. Preuss, Lutz & Vazquez-Brust, Diego & Yakovleva, Natalia & Foroughi, Hamid & Mutti, Diana, 2022. "When social movements close institutional voids: Triggers, processes, and consequences for multinational enterprises," Journal of World Business, Elsevier, vol. 57(1).
    16. Gaur, Ajai & Malhotra, Shavin & Zhu, PengCheng, 2022. "Institutional distance and ownership in foreign acquisitions," Journal of International Management, Elsevier, vol. 28(2).
    17. Ma, Shuzhong & Chai, Yuxi & Jia, Fu, 2022. "Mitigating transaction risk for cross-border e-commerce firms: A multiagent-based simulation study," International Business Review, Elsevier, vol. 31(4).
    18. Singh, Deeksha & Gaur, Ajai S., 2021. "Risk mitigation strategies in international B2B relationships: Role of institutions and governance," Journal of Business Research, Elsevier, vol. 136(C), pages 1-9.
    19. Robert Grosse & Jonas Gamso & Roy C. Nelson, 2021. "China’s Rise, World Order, and the Implications for International Business," Management International Review, Springer, vol. 61(1), pages 1-26, March.
    20. Xu, Kai & Hitt, Michael A. & Brock, David & Pisano, Vincenzo & Huang, Lulu S.R., 2021. "Country institutional environments and international strategy: A review and analysis of the research," Journal of International Management, Elsevier, vol. 27(1).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Eduardsen, Jonas & Marinova, Svetla, 2020. "Internationalisation and risk: Literature review, integrative framework and research agenda," International Business Review, Elsevier, vol. 29(3).
    2. King, Timothy & Loncan, Tiago & Khan, Zaheer, 2021. "Investment, leverage and political risk: Evidence from project-level FDI," Journal of Corporate Finance, Elsevier, vol. 67(C).
    3. Weiguo Zhong & Ya Lin & Danxue Gao & Haibin Yang, 2019. "Does politician turnover affect foreign subsidiary performance? Evidence in China," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 50(7), pages 1184-1212, September.
    4. Gamso, Jonas & Nelson, Roy C., 2019. "Does partnering with the World Bank shield investors from political risks in less developed countries?," Journal of World Business, Elsevier, vol. 54(5), pages 1-1.
    5. Pei Sun & Jonathan P. Doh & Tazeeb Rajwani & Donald Siegel, 2021. "Navigating cross-border institutional complexity: A review and assessment of multinational nonmarket strategy research," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 52(9), pages 1818-1853, December.
    6. Caroline T Witte & Martijn J Burger & Elena I Ianchovichina & Enrico Pennings, 2017. "Dodging bullets: The heterogeneous effect of political violence on greenfield FDI," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 48(7), pages 862-892, September.
    7. Röell, Christiaan & Osabutey, Ellis & Rodgers, Peter & Arndt, Felix & Khan, Zaheer & Tarba, Shlomo, 2022. "Managing socio-political risk at the subnational level: Lessons from MNE subsidiaries in Indonesia," Journal of World Business, Elsevier, vol. 57(3).
    8. Liu, Xiaohui & Gao, Lan & Lu, Jiangyong & Lioliou, Eleni, 2016. "Environmental risks, localization and the overseas subsidiary performance of MNEs from an emerging economy," Journal of World Business, Elsevier, vol. 51(3), pages 356-368.
    9. Dang, Quyen Thao & Jasovska, Pavlina & Rammal, Hussain Gulzar, 2020. "International business-government relations: The risk management strategies of MNEs in emerging economies," Journal of World Business, Elsevier, vol. 55(1).
    10. Peter J Buckley & Liang Chen & L Jeremy Clegg & Hinrich Voss, 2018. "Risk propensity in the foreign direct investment location decision of emerging multinationals," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 49(2), pages 153-171, February.
    11. Aguilera, Ruth & Duran, Patricio & Heugens, P.P.M.A.R. & Sauerwald, Steve & Turturea, Roxana & VanEssen, Marc, 2021. "State ownership, political ideology, and firm performance around the world," Journal of World Business, Elsevier, vol. 56(1).
    12. Puhr, Harald & Müllner, Jakob, 2024. "Vox populi, vox dei: A concept and measure for grassroots socio-political risk using Google Trends," Journal of International Management, Elsevier, vol. 30(2).
    13. Mario Daniele Amore & Margherita Corina, 2021. "Political elections and corporate investment: International evidence," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 52(9), pages 1775-1796, December.
    14. Cavusgil, S. Tamer & Deligonul, Seyda & Ghauri, Pervez N. & Bamiatzi, Vassiliki & Park, Byung Il & Mellahi, Kamel, 2020. "Risk in international business and its mitigation," Journal of World Business, Elsevier, vol. 55(2).
    15. Clegg, L. Jeremy & Voss, Hinrich & Tardios, Janja A., 2018. "The autocratic advantage: Internationalization of state-owned multinationals," Journal of World Business, Elsevier, vol. 53(5), pages 668-681.
    16. Xia Han & Xiaohui Liu & Lan Gao & Pervez Ghauri, 2018. "Chinese Multinational Enterprises in Europe and Africa: How do They Perceive Political Risk?," Management International Review, Springer, vol. 58(1), pages 121-146, February.
    17. Yadong Luo & Huan Zhang & Juan Bu, 2019. "Developed country MNEs investing in developing economies: Progress and prospect," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 50(4), pages 633-667, June.
    18. Anthony Goerzen & Stephen Sapp & Andrew Delios, 2010. "Investor Response to Environmental Risk in Foreign Direct Investment," Management International Review, Springer, vol. 50(6), pages 683-708, December.
    19. Lindner, Thomas & Muellner, Jakob & Puck, Jonas, 2016. "Cost of Capital in an International Context: Institutional Distance, Quality, and Dynamics," Journal of International Management, Elsevier, vol. 22(3), pages 234-248.
    20. Estrin, Saul & Meyer, Klaus E. & Nielsen, Bo B. & Nielsen, Sabina, 2016. "Home country institutions and the internationalization of state owned enterprises: A cross-country analysis," Journal of World Business, Elsevier, vol. 51(2), pages 294-307.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:worbus:v:55:y:2020:i:2:s1090951618306588. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/wps/find/journaldescription.cws_home/620401/description#description .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.