Managing around populism

Abstract

This chapter reviews the key obstacles to understanding the effects of populism on international business (IB) by focusing on one particular and well-studied facet of IB, firm market entry strategies. While populism has already had and potentially can have future serious repercussions for macroeconomic stability, talent sourcing, and value chain integration, a much more immediate effect of the current strain of anti-globalization populism can be to alter the incentives that a multinational enterprise (MNE) faces in its internationalization approaches and in the decision on where to invest. In practical terms, populist political environments may lead to outright restrictions on some modes of entry but are more likely to incentivize firms top utilize “safer” modes of market entry, which includes outright delays in foreign investment. The constrained space that populism may offer for entry modes may also ratchet up transaction costs to a point that firms will need to re-think their internationalization – not necessarily the strategy, but the planned location for foreign direct investment. In this sense, populists may get what they want, with a reduction of foreign business, and hence foreign influence, within their borders.