Uncovering the complex relationships between political risk and MNE firm legitimacy: Insights from Libya

Journal of International Business Studies

Volumn 47, Issue 1, 2016, Pages 68-92

  Sidki Darendeli, Izzet ^a   Hill, T L ^b  

^a CALIFORNIA STATE UNIVERSITY   (United States)

^b TEMPLE UNIVERSITY   (United States)

Author keywords

Institutional theory; Legitimacy; Non market strategy; Political risk; Political ties; natural experiment

Indexed keywords

EID: 84950298434     PISSN: 00472506     EISSN: 14786990     Source Type: Journal    
DOI: 10.1057/jibs.2015.27     Document Type: Article

References (144)

1. Acemoglu, D., & Robinson, J. A. 2006. Economic origins of dictatorship and democracy. Cambridge: Cambridge University Press.
2. Aldrich, H. E., & Fiol, C. M. 1994. Fools rush in? The institutional context of industry creation. Academy of Management Review, 19(4): 645-670.
3. Alon, I., Gurumoorthy, R., Mitchell, M. C., & Steen, T. 2006. Managing micropolitical risk: A cross-sector examination. Thunderbird International Business Review, 48(5): 623-642.
4. Alon, I., & Herbert, T. T. 2009. A stranger in a strange land: Micro political risk and the multinational firm. Business Horizons, 52 (2): 127-137.
5. Anderson, L. 1990. Tribe and state: Libyan anomalies. In P. S. Khoury, & J. Kostiner (Eds), Tribes and state formation in the Middle East. Berkeley, CA: University of California Press 288-302.
6. Anderson, L. 2011. Demystifying the Arab spring: Parsing the differences between Tunisia, Egypt, and Libya. Foreign Affairs, 90(3): 2-7.
7. Baron, D. P. 2001. Private politics, corporate social responsibility, and integrated strategy. Journal of Economics & Management Strategy, 10(1): 7-45.
8. Baxter, P., & Jack, S. 2008. Qualitative case study methodology: Study design and implementation for novice researchers. The Qualitative Report, 13(4): 544-559.
9. Bekaert, G., Harvey, C. R., Lundblad, C. T., & Siegel, S. 2013. Political risk spreads. Journal of International Business Studies, 25 (3): 732-756.
10. Birkinshaw, J., Brannen, M. Y., & Tung, R. L. 2011. From a distance and generalizable to up close and grounded: Reclaiming a place for qualitative methods in international business research. Journal of International Business Studies, 42(5): 573-581.
11. Bitektine, A. 2011. Toward a theory of social judgments of organizations: The case of legitimacy, reputation, and status. Academy of Management Review, 36(1): 151-179.
12. Boddewyn, J. J. 1995. The legitimacy of international-business political behavior. The International Trade Journal, 9(1): 143-161.
13. Boddewyn, J. J., & Brewer, T. L. 1994. International-business political behavior: New theoretical directioins. Academy of Management Review, 19(1): 119-143.
14. Boduszyñski, M. P., & Pickard, D. 2013. Libya starts from scratch. Journal of Democracy, 24(4): 86-96.
15. Brouthers, K. 2002. Institutional, cultural and transaction cost influences on entry mode. Journal of International Business Strategies, 33(2): 203-221.
16. Bucheli, M., & Kim, M.-Y. 2012. Political institutional change, obsolescing legitimacy, and multinational corporations: The case of the Central American banana industry. Management International Review, 52(6): 847-877.
17. Bucheli, M., & Salvaj, E. 2013. Reputation and political legitimacy: ITT in Chile, 1927-1972. Business History Review, 87(4): 729-755.
18. Burgelman, R. A. 2011. Bridging history and reductionism: A key role for longitudinal qualitative research. Journal of International Business Studies, 42(5): 591-601.
19. Cassinelli, C. 1959. The "consent" of the governed. Political Research Quarterly, 12(2): 391-409.
20. Chen, C. J., Ding, Y., & Kim, C. F. 2010. High-level politically connected firms, corruption, and analyst forecast accuracy around the world. Journal of International Business Studies, 41(9): 1505-1524.
21. Claasen, C., & Roloff, J. 2012. The link between responsibility and legitimacy: The case of DeBeers in Namibia. Journal of Business Ethics, 107(3): 379-398.
22. Click, R. W. 2005. Financial and political risks in US direct foreign investment. Journal of International Business Studies, 36(5): 559-575.
23. Collins, K. 2004. The logic of clan politics: Evidence from Central Asian trajectories. World Politics, 56(2): 224-261.
24. Cook, T. D., Campbell, D. T., & Day, A. 1979. Quasi-experimentation: Design & analysis issues for field settings. Boston: Houghton Mifflin.
25. Corbin, J. M., & Strauss, A. 1990. Grounded theory research: Procedures, canons, and evaluative criteria. Qualitative Sociology, 13(1): 3-21.
26. Cuervo-Cazurra, A. 2006. Who cares about corruption? Journal of International Business Studies, 37(6): 807-822.
27. Cuervo-Cazurra, A. 2011. Selecting the country in which to start internationalization: The non-sequential internationalization model. Journal of World Business, 46(4): 426-437.
28. Cuervo-Cazurra, A., & Genc, M. 2008. Transforming disadvantages into advantages: Developing-country MNEs in the least developed countries. Journal of International Business Studies, 39 (6): 957-979.
29. Czinkota, M. R., Knight, G., Liesch, P. W., & Steen, J. 2010. Terrorism and international business: A research agenda. Journal of International Business, 41(5): 826-843.
30. Dacin, M. T., Oliver, C., & Roy, J. P. 2007. The legitimacy of strategic alliances: An institutional perspective. Strategic Management Journal, 28(2): 169-187.
31. Dahan, N. M., Doh, J. P., Oetzel, J., & Yaziji, M. 2010. Corporate -NGO collaboration: Co-creating new business models for developing markets. Long Range Planning, 43(2): 326-342.
32. Dai, L., Eden, L., & Beamish, P. W. 2013. Place, space, and geographical exposure: Foreign subsidiary survival in conflict zones. Journal of International Business Studies, 44(6): 554-578.
33. Delios, A., & Henisz, W. J. 2000. Japanese firms investment strategies in emerging economies. Academy of Management Journal, 43(3): 305-323.
34. Delios, A., & Henisz, W. J. 2003a. Policy uncertainty and the sequence of entry by Japanese firms, 1980-1998. Journal of International Business Studies, 34(3): 227-241.
35. Delios, A., & Henisz, W. J. 2003b. Political hazards, experience, and sequential entry strategies: The international expansion of Japanese firms, 1980-1998. Strategic Management Journal, 24(11): 1153-1164.
36. den Hond, F., Rehbein, K. A., de Bakker, F. G. A., & Kooijmans-van Lankveld, H. 2014. Playing on two chessboards: Reputation effects between corporate social responsibility (CSR) and corporate political activity (CPA). Journal of Management Studies, 51(5): 790-813.
37. Dieleman, M., & Sachs, W. M. 2008. Coevolution of institutions and corporations in emerging economies: How the Salim group morphed into an institution of Suharto's crony regime. Journal of Management Studies, 45(7): 1274-1300.
38. DiMaggio, P. J., & Powell, W. W. 1991. The new institutionalism in organizational analysis. Chicago: University of Chicago Press.
39. Doh, J. P., & Guay, T. R. 2006. Corporate social responsibility, public policy, and NGO activism in Europe and the United States: An institutional-stakeholder perspective. Journal of Management Studies, 43(1): 47-73.
40. Doh, J. P., & Ramamurti, R. 2003. Reassessing risk in developing country infrastructure. Long Range Planning, 36(4): 337-353.
41. Doh, J. P., Rodriguez, P., Uhlenbruck, K., Collins, J., & Eden, L. 2003. Coping with corruption in foreign markets. The Academy of Management Executive, 17(3): 114-127.
42. Doh, J. P., & Teegen, H. 2002. Nongovernmental organizations as institutional actors in international business: Theory and implications. International Business Review, 11(6): 665-684.
43. Eisenhardt, K. M. 1989. Building theories from case study research. Academy of Management Review, 14(4): 532-550.
44. Eisenhardt, K. M., & Graebner, M. E. 2007. Theory building from cases: Opportunities and challenges. Academy of Management Journal, 50(1): 25-32.
45. El-Kikhia, M. O. 1997. Libya's Qaddafi: The politics of contradiction. Gainesville, FL: University Press of Florida.
46. Farashahi, M., & Hafsi, T. 2009. Strategy of firms in unstable institutional environments. Asia Pacific Journal of Management, 26(4): 643-666.
47. Feinberg, S. E., & Gupta, A. K. 2009. MNC subsidiaries and country risk: Internalization as a safeguard against weak external institutions. Academy of Management Journal, 52(2): 381-399.
48. Figueira-de-Lemos, F., Johanson, J., & Vahlne, J.-E. 2011. Risk management in the internationalization process of the firm: A note on the Uppsala model. Journal of World Business, 46(2): 143-153.
49. Fisman, R. 2001. Estimating the value of political connections. The American Economic Review, 91(4): 1095-1102.
50. Fitzpatrick, M. 1983. The definition and assessment of political risk in international business: A review of the literature. Academy of Management Review, 8(2): 249-254.
51. Fredriksson, P. G., & Svensson, J. 2003. Political instability, corruption and policy formation: The case of environmental policy. Journal of Public Economics, 87(7): 1383-1405.
52. Frynas, J. G., & Mellahi, K. 2003. Political risks as firm-specific (dis) advantages: Evidence on transnational oil firms in Nigeria. Thunderbird International Business Review, 45(5): 541-565.
53. Frynas, J. G., Mellahi, K., & Pigman, G. A. 2006. First mover advantages in international business and firm-specific political resources. Strategic Management Journal, 27(4): 321-345.
54. Gerring, J. 2007. Case study research: Principles and practices. New York: Cambridge University Press.
55. Getz, K. A., & Oetzel, J. 2009. MNE strategic intervention in violent conflict: Variations based on conflict characteristics. Journal of Business Ethics, 89(4): 375-386.
56. Gifford, B., & Kestler, A. 2008. Toward a theory of local legitimacy by MNEs in developing nations: Newmont mining and health sustainable development in Peru. Journal of International Management, 14(4): 340-352.
57. Gifford, B., Kestler, A., & Anand, S. 2010. Building local legitimacy into corporate social responsibility: Gold mining firms in developing nations. Journal of World Business, 45(3): 304-311.
58. Glaser, B. G., & Strauss, A. L. 1967. The discovery of grounded theory: Strategies for qualitative research. Chicago: Aldine Publishing.
59. Greenwood, R., & Suddaby, R. 2006. Institutional entrepreneurship in mature fields: The big five accounting firms. Academy of Management Journal, 49(1): 27-48.
60. Hadjikhani, A., & Ghauri, P. N. 2001. The behaviour of international firms in socio-political environments in the European Union. Journal of Business Research, 52(3): 263-275.
61. Hadjikhani, A., Lee, J.-W., & Ghauri, P. N. 2008. Network view of MNCs' socio-political behavior. Journal of Business Research, 61(9): 912-924.
62. Henisz, W. J. 2002. The institutional environment for infrastructure investment. Industrial and Corporate Change, 11(2): 355-389.
63. Henisz, W. J., Dorobantu, S., & Nartey, L. J. 2014. Spinning gold: The financial returns to stakeholder engagment. Strategic Management Journal, 35(12): 1727-1748.
64. Henisz, W. J., Mansfield, E. D., & Von Glinow, M. A. 2010. Conflict, security, and political risk: International business in challenging times. Journal of International Business Studies, 41(5): 759-764.
65. Henisz, W. J., & Zelner, B. A. 2004. Explicating political hazards and safeguards: A transaction cost politics approach. Industrial and Corporate Change, 13(6): 901-915.
66. Henisz, W. J., & Zelner, B. A. 2005. Legitimacy, interest group pressures, and change in emergent institutions: The case of foreign investors and host country governments. Academy of Management Review, 30(2): 361-382.
67. Henisz, W. J., & Zelner, B. A. 2010. The hidden risks in emerging markets. Harvard Business Review, 88(4): 88-95.
68. Henisz, W. J., & Zelner, B. A. 2012. Strategy and competition in the market and nonmarket arenas. Academy of Management Perspectives, 26(3): 40-51.
69. Hillman, A. J. 2003. Determinants of political strategies in US multinationals. Business & Society, 42(4): 455-484.
70. Hillman, A. J., & Hitt, M. A. 1999. Corporate political strategy formulation: A model of approach, participation and strategy decisions. Academy of Management Review, 24(4): 825-842.
71. Hillman, A. J., Keim, G. D., & Schuler, D. 2004. Corporate political activity: A review and research agenda. Journal of Management, 30(6): 837-857.
72. Hillman, A. J., & Wan, W. P. 2005. The determinants of MNE subsidiaries' political strategies: Evidence of institutional duality. Journal of International Business Studies, 36(3): 322-340.
73. Hirsch, P. M., & Lounsbury, M. 1997. Ending the family quarrel toward a reconciliation of "old" and "new" institutionalisms. American Behavioral Scientist, 40(4): 406-418.
74. Holtbrügge, D., Berg, N., & Puck, J. F. 2007. To bribe or to convince? Political stakeholders and political activities in German multinational corporations. International Business Review, 16(1): 47-67.
75. Hoskisson, R. E., Eden, L., Lau, C. M., &Wright, M. 2000. Strategy in emerging economies. Academy of Management Journal, 43 (3): 249-267.
76. Howell, L. D. 2014. Evaluating political risk forecasting models: What works? Thunderbird International Business Review, 56(4): 305-316.
77. Howell, L. D., & Chaddick, B. 1994. Political risk as change in policy or change in government. Columbia Journal of World Business, 29(3): 70-91.
78. Hweio, H. 2012. Tribes in Libya: Fromsocial organization to political power. African Conflict & Peacebuilding Review, 2(1): 111-121.
79. Johanson, J., & Vahlne, J.-E. 2009. The Uppsala internationalization process model revisited: From liability of foreignness to liability of outsidership. Journal of International Business Studies, 40(9): 1411-1431.
80. Johnson, S., & Mitton, T. 2003. Croynism and capital controls: Evidence from Malaysia. Journal of Financial Economics, 67(2): 351-382.
81. Jost, J. T., & Major, B. 2001. The psychology of legitimacy: Emerging perspectives on ideology, justice, and intergroup relations. Cambridge: Cambridge University Press.
82. Kesternich, I., & Schnitzer, M. 2010. Who is afraid of political risk? Multinational firms and their choice of capital structure. Journal of International Economics, 82(2): 208-218.
83. Khanna, T., & Palepu, K. 2000. The future of business groups in emerging markets: Long-run evidence from Chile. Academy of Management Journal, 43(3): 268-285.
84. Kinsman, J. 2011. Libya: A case for humanitarian intervention. Policy Options, 32(9): 81-87.
85. Kivleniece, I., & Quelin, B. V. 2012. Creating and capturing value in public-private ties: A private actor's perspective. Academy of Management Review, 37(2): 272-299.
86. Kobrin, S. J. 1984. Expropriation as an attempt to control foreign firms in LDCs: Trends from 1960-1979. International Studies Quarterly, 28(3): 329-348.
87. Kogut, B., & Zander, U. 2000. Did socialism fail to innovate? A natural experiment of the two Zeiss companies. American Sociological Review, 65(2): 169-190.
88. Kostova, T., Roth, K., & Dacin, M. T. 2008. Institutional theory in the study of multinational corporations: A critique and new directions. Academy of Management Review, 33(4): 994-1006.
89. Lacher, W. 2011. Families, tribes and cities in the Libyan revolution. Middle East Policy, 18(4): 140-154.
90. Lawton, T., McGuire, S., & Rajwani, T. 2013. Corporate political activity: A literature review and research agenda. International Journal of Management Reviews, 15(1): 86-105.
91. Lehrer, M., & Delaunay, C. 2009. Multinational enterprises and the promotion of civil society: The challenge for 21st century capitalism. California Management Review, 51(4): 126-147.
92. Leuz, C., & Oberholzer-Gee, F. 2006. Political relationships, global financing, and corporate transparency: Evidence from Indonesia. Journal of Financial Economics, 81(2): 411-439.
93. Lieberson, S. 1991. Small N's and big conclusions: An examination of the reasoning in comparative studies based on a small number of cases. Social Forces, 70(2): 307-320.
94. Luo, Y. 2006. Political behavior, social responsibility, and perceived corruption: a structuration perspective. Journal of International Business Studies, 37(6): 747-766.
95. MacGinty, R. 2004. Looting in the context of violent conflict: A conceptualisation and typology. Third World Quarterly, 25(5): 857-870.
96. Makhija, M. V. 1993. Government intervention in the Venezuelan petroleum industry: An empirical investigation of political risk. Journal of International Business Studies, 24(3): 531-555.
97. Makhija, M. V., & Stewart, A. C. 2002. The effect of national context on perceptions of risk: A comparison of planned versus free-market managers. Journal of International Business Studies, 33(4): 737-756.
98. Marano, V., & Tashman, P. 2012. MNE/NGO partnerships and the legitimacy of the firm. International Business Review, 21(6): 1122-1130.
99. Mellahi, K., Demirbag, M., & Riddle, L. 2011. Multinationals in the Middle East: Challenges and opportunities. Journal of World Business, 46(4): 406-410.
100. Meyer, K., Estrin, S., Bhaumik, S., & Peng, M. 2009. Institutions, resources and entry strategies in emerging economies. Strategic Management Journal, 30(1): 61-80.
101. Miles, M. B., & Huberman, A. M. 1994. Qualitative data analysis: An expanded sourcebook. Beverly Hills, CA: Sage Publications.
102. Miller, K. D. 1992. A framework for integrated risk management in international business. Journal of International Business Studies, 23(2): 311-331.
103. Myers, C. N. 2013. Tribalism and democratic transition in Libya: Lessons from Iraq. Global Tides, 7(1): 5.
104. Nebus, J., & Rufin, C. 2010. Extending the bargaining power model: Explaining the bargaining outcomes among nations, MNEs and NGOs. Journal of International Business Studies, 41(6): 996-1015.
105. North, D. C. 1990. Institutions, institutional change and economic performance. Cambridge: Cambridge University Press.
106. O'Higgins, E. R. E. 2006. Corruption, underdevelopment, and extractive resource industries: Addressing the vicious cycle. Business Ethics Quarterly, 16(2): 235-524.
107. Oetzel, J. M., Bettis, R. A., & Zenner, M. 2001. Country risk measures: How risky are they? Journal of World Business, 36(2): 128-145.
108. Oetzel, J., & Doh, J. P. 2009. MNEs and development: A review and reconceptualization. Journal of World Business, 44(2): 108-120.
109. Oetzel, J. M., & Oh, C. H. 2014. Learning to carry the cat by the tail: Firm experience, disasters and multinational subsidiary entry and expansion. Organization Science, 25(3): 732-756.
110. Oliver, C. 1991. Strategic responses to institutional processes. Academy of Management Review, 16(1): 145-179.
111. Oliver, C., & Holzinger, I. 2008. The effectiveness of strategic political management: A dynamic capabilities framework. Academy of Management Review, 33(2): 496-520.
112. Opp, M. M. 2012. Expropriation risk and technology. Journal of Financial Economics, 103(1): 113-129.
113. Oxley, J. E. 1999. Institutional environment and the mechanisms of governance: The impact of intellectual property rights on the structure of inter-firm alliances. Journal of Economic Behavior and Organization, 38(3): 283-309.
114. Palazzo, G., & Scherer, A. G. 2006. Corporate legitimacy as as deliberation: A communication framework. Journal of Business Ethics, 66(1): 71-88.
115. Patriotta, G., Gond, J. P., & Schultz, F. 2011. Maintaining legitimacy: Controversies, orders of worth, and public justifications. Journal of Management Studies, 48(8): 1804-1836.
116. Peng, M. 2003. Institutional transitions and strategic choices. Academy of Management Review, 28(2): 275-296.
117. Peng, M. W., & Luo, Y. 2000. Managerial ties and firm performance in a transition economy: The nature of a micro -macro link. Academy of Management Journal, 43(3): 486-501.
118. Peng, M. W., Wang, D. Y., & Jiang, Y. 2008. An institution-based view of international business strategy: A focus on emerging economies. Journal of International Business Studies, 39(5): 920-936.
119. Ragin, C. C. 1987. The comparative method: Moving beyond qualitative and quantitative strategies. Berkeley, CA: University of California Press.
120. Ragin, C. C. 1994. Constructing social research: The unity and diversity of method. Thousand Oaks, CA: Pine Forge Press.
121. Ragin, C. C. 2008. Redesigning social inquiry: Fuzzy sets and beyond. Chicago: University of Chicago Press.
122. Remler, D. K., & Van Ryzin, G. G. 2011. Research methods in practice: Strategies for description and causation. Thousand Oaks, CA: Sage Publications.
123. Rizopoulos, Y. A., & Sergakis, D. E. 2010. MNEs and policy networks: Institutional embeddedness and strategic choice. Journal of World Business, 45(3): 250-256.
124. Rodriguez, P., Uhlenbruck, K., & Eden, L. 2005. Government corruption and the entry strategies of multinationals. Academy of Management Review, 30(2): 383-396.
125. Roth, K., & Kostova, T. 2003. Organizational coping with institutional upheaval in transition economies. Journal of World Business, 38(4): 314-330.
126. Scherer, A. G., Palazzo, G., & Seidl, D. 2013. Managing legitimacy in complex and heterogeneous environments: Sustainable development in a globalized world. Journal of Management Studies, 50(2): 259-284.
127. Siegel, J. 2007. Contingent political capital and international alliances: Evidence from South Korea. Administrative Science Quarterly, 52(4): 621-666.
128. Steger, U. 2003. Corporate diplomacy: The strategy for a volatile, fragmented business environment. Chichester: Wiley.
129. Suchman, M. C. 1995. Managing legitimacy: Strategic and institutional approaches. Academy of Management Review, 20(3): 571-610.
130. Suddaby, R., & Greenwood, R. 2005. Rhetorical strategies of legitimacy. Administrative Science Quarterly, 50(1): 35-67.
131. Sun, P., Mellahi, K., & Thun, E. 2010. The dynamic value of MNE political embeddedness: The case of the Chinese automobile industry. Journal of International Business Studies, 41(7): 1161-1182.
132. Sun, P., Mellahi, K., & Wright, M. 2012. The contingent value of corporate political ties. The Academy of Management Perspectives, 26(3): 68-82.
133. Teegen, H., Doh, J. P., & Vachani, S. 2004. The importance of nongovernmental organizations (NGOs) in global governance and value creation: An international business research agenda. Journal of International Business Studies, 35(6): 463-483.
134. Thornton, P. H., Ocasio, W., & Lounsbury, M. 2012. The institutional logics perspective: A new approach to culture, structure and process. Oxford: Oxford University Press.
135. Tost, L. P. 2011. An integrative model of legitimacy judgments. Academy of Management Review, 36(4): 686-710.
136. Vachani, S. 1995. Enhancing the obsolescing bargain theory: A longitudinal study of foreign ownership of US and European multinationals. Journal of International Business, 26(1): 159-180.
137. Vernon, R. 1971. Sovereignty at bay: The multinational spread of US enteprises. New York: Basic Books.
138. Welch, C., Piekkari, R., Plakoyiannaki, E., & Paavilainen-Mäntymäki, E. 2011. Theorising from case studies: Towards a pluralist future for international business research. Journal of International Business Studies, 42(5): 740-762.
139. Windsor, D. 2007. Toward a global theory of cross-border and multilevel corporate political activity. Business & Society, 46(2): 253-278.
140. Yaprak, A., & Karademir, B. 2011. Emerging market multinationals' role in facilitating developed country multinationals' regional expansion: A critical review of the literature and Turkish MNC examples. Journal of World Business, 46(4): 438-446.
141. Yin, R. K. 2002. Case study research: Design and methods. London: Sage Publications.
142. Zhao, M. 2012. CSR-based political legitimacy strategy: Managing the state by doing good in China and Russia. Journal of Business Ethics, 111(4): 439-460.
143. Zhu, H., & Chung, C.-N. 2014. Portfolios of political ties and business group strategy in emerging economies: Evidence from Taiwan. Administrative Science Quarterly, 59(4): 599-638.
144. Zilber, T. B. 2006. The wok of the symbolic in institutional processes: Translations of rational myths in Israeli high tech. Academy of Management Journal, 49(2): 281-303.