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.