When does geopolitics negate political capabilities? This paper examines how evolving home-host country relations shape foreign direct investment (FDI) strategies of multinational enterprises (MNEs), focusing on the interplay of political capabilities in the context of South-South geopolitics. Analyzing 877 greenfield investments from 2003 to 2019, our findings reveal that MNEs’ political capabilities increase the likelihood of FDI when investing in countries that share the same colonizer with their home countries. However, we also find that political affinity in current home-host country relations diminishes the value of these political capabilities, demonstrating a substitutability effect. This study contributes to international business and international relations literature by highlighting the contrasting value of political capabilities for historical and present-day geopolitical landscapes in the global South.

We examine how multinational enterprises (MNEs) respond to changing

corruption practices in a sudden transition of political systems in an

emerging market. We draw on the political science and corporate political

activity literatures in explaining how local subsidiary firms of MNEs

(subsidiaries) adapted their political activities during the transformation

of Indonesia’s political landscape from an autocratic regime (1967-1998)

to a democratic and decentralized system. Based on multiple qualitative

case studies of Western European subsidiaries, we found that MNEs

adapted their political strategies to manage evolving power structures in

an environment of arbitrary and pervasive corruption. Under Suharto,

MNEs sought to develop relations with his regime, while also seeking to

avoid informal transaction costs. From 1998, MNEs began to conduct

survival strategies by partnering with competitors, leveraging political

networks, and outsourcing corrupt practices. Later, however, MNEs

developed alternatives to ethically suspect political strategies, for

example by leveraging government partnerships that focused on

environmental sustainability, supporting national interests, and forming

relationships with local communities. We show that corruption in

transitioning political systems is a dynamic, evolving phenomenon. In this

landscape, MNEs have more room for active agency in managing corrupt

demands in ethical ways than the literature has suggested.

The ownership decision in cross-border acquisitions (CBAs) is a critical strategic choice for emerging market multinational enterprises (EMNEs) operating in countries with varying intellectual property rights (IPR) regimes. This study integrates insights from transaction cost economics, institutional theory, and the springboard perspective to examine the ownership levels EMNEs choose when acquiring companies in countries with stronger IPR regimes than their home country. We argue that EMNEs are more likely to secure a higher ownership stake when the target firm is in a host country with a more robust IPR regime compared to their home country. However, this relationship is negatively moderated by the degree of IPR robustness differences between home and host countries. Additionally, the study introduces a three-way moderation effect, suggesting that state-ownership may mitigate this negative moderating impact. State-owned EMNEs tend to maintain higher ownership stakes, even when acquiring firms in countries with highly stringent IPR regimes than their home country, compared to private firms. Overall, this study provides a more nuanced understanding of the ownership strategies employed by EMNEs in the context of CBAs across different IPR regimes.

Past research suggests that institutional distance has asymmetric impacts on decisions made by multinational enterprises (MNEs) depending on the direction of the distance. A positive distance refers to an institutionally more developed host country, while a negative distance is associated with an institutionally weaker target country. Drawing on the directionality logic of institutional distance, this article investigates these asymmetric effects on Chinese MNEs’ decisions on establishment mode. This study analyzes the influence of the direction of institutional distance on the choice between acquisitions and greenfield investments as an establishment mode. It also addresses the potential effect of the Belt and Road Initiative (BRI) and state ownership as moderators. The empirical research uses data from 1,162 foreign direct investments by Chinese firms during 2013-2022. The results show that Chinese MNEs will be less likely to prefer acquisitions over greenfield investments as positive institutional distance increases. Moreover, this negative association is lower in BRI countries and higher for state-owned enterprises.