Abstract
Previous studies have suggested that (1) a type of organizational capabilities—namely, political capabilities—are required for multinational corporations (MNCs) to grow in global markets, (2) political capabilities are important for building productive relations with governments in politically risky host countries, and (3) MNCs can develop political capabilities by accumulating foreign experiences. However, empirical studies have found both positive and negative effects of such experiences on global market expansions. This study attributes such mixed findings to our lack of understanding about MNCs’ procurement processes of political capabilities and proposes types of experiences critical for such procurements by focusing on their reactions to political changes in host countries. Using data on the global mining industry and political changes in host countries, we find that MNCs develop political capabilities and thus make entries into politically risky host countries when they accumulate the experience of partially divesting some of their assets after political changes in host countries. We also find that MNCs are less likely to enter such countries if they have more experiences of exiting from host countries following political change.
Similar content being viewed by others
References
Argote, L., & Ingram, P. (2000). Knowledge transfer: A basis for competitive advantage in firms. Organizational Behavior and Human Decision Processes, 82(1), 150–169.
Argote, L., Ingram, P., Levine, J. M., & Moreland, R. L. (2000). Knowledge transfer in organizations: Learning from the experience of others. Organizational Behavior and Human Decision Processes, 82(1), 1–8.
Barkema, H. G., Shekar, O., Vermeulen, F., & Bell, J. H. J. (1997). Working abroad, working with others: How firms learn to operate international joint ventures. Academy of Management Journal, 40(2), 426–442.
Barney, J. (1991). Firm resources and sustained competitive advantage. Journal of Management, 17(1), 99–120.
Baron, D. P. (1995). Integrated strategy. California Management Review, 37(2), 47–65.
Baum, J. A. C., & Ingram, P. (1998). Survival-enhancing learning in the Manhattan hotel industry, 1898–1980. Management Science, 44(7), 996–1016.
Białkowski, J., Gottschalk, K., & Wisniewski, T. P. (2008). Stock market volatility around national elections. Journal of Banking and Finance, 32(9), 1941–1953.
Björkman, I., Barner-Rasmussen, W., & Li, L. (2004). Managing knowledge transfer in MNCs: The impact of headquarters control mechanisms. Journal of International Business Studies, 35(5), 443–455.
Boddewyn, J. J., & Brewer, T. L. (1994). International-business political behavior: New theoretical directions. Academy of Management Review, 19(1), 119–143.
Boutchkova, M., Doshi, H., Durnev, A., & Molchanov, A. (2012). Precarious politics and return volatility. Review of Financial Studies, 25(4), 1111–1154.
Buckley, P. J., Chen, L., Clegg, L. J., & Voss, H. (2016). Experience and FDI Risk-taking: A microfoundational reconceptualization. Journal of International Management, 22(2), 131–146.
Chang, S. J. (1995). International expansion strategy of Japanese firms: Capability building through sequential entry. Academy of Management Journal, 38(2), 383–407.
Chittoor, R., Ray, S., Aulakh, P. S., & Sarkar, M. B. (2008). Strategic responses to institutional changes: ‘Indigenous growth’ model of the Indian pharmaceutical industry. Journal of International Management, 14(3), 252–269.
Click, R. W., & Weiner, R. J. (2010). Resource nationalism meets the market: Political risk and the value of petroleum reserves. Journal of International Business Studies, 41(5), 783–803.
Cyert, R. M., & March, J. G. (1963). A behavioral theory of the firm. Englewood Cliffs, NJ: Prentice-Hall.
Delios, A., & Beamish, P. W. (2001). Survival and profitability: The roles of experience and intangible assets in foreign subsidiary performance. Academy of Management Journal, 44(5), 1028–1038.
Delios, A., & Henisz, W. J. (2000). Japanese firms’ investment strategies in emerging economies. Academy of Management Journal, 43(3), 305–323.
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.
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), 1153–1156.
Dieleman, M., & Boddewyn, J. J. (2012). Using organization structure to buffer political ties in emerging markets: A case study. Organization Studies, 33(1), 71–95.
Doh, J. P., Lawton, T. C., & Rajwani, T. (2012). Advancing nonmarket strategy research: Institutional perspectives in a changing world. Academy of Management Perspectives, 26(3), 22–39.
Dunning, J. H. (1988). The eclectic paradigm of international production: A restatement and some possible extensions. Journal of International Business Studies, 19(1), 1–31.
Ellis, K. M., Reus, T. H., Lamont, B. T., & Ranft, A. L. (2011). Transfer effects in large acquisitions: How size-specific experience matters. Academy of Management Journal, 54(6), 1261–1276.
Faccio, M. (2006). Politically connected firms. American Economic Review, 96(1), 369–386.
Fagre, N., & Wells, L. T. (1982). Bargaining power of multinationals and host governments. Journal of International Business Studies, 13(1), 9–23.
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.
Foss, N. J., & Pedersen, T. (2002). Transferring knowledge in MNCs: The role of sources of subsidiary knowledge and organizational context. Journal of International Management, 8(1), 49–67.
Freeman, L. C. (1979). Centrality in social networks conceptual clarification. Social Networks, 1(3), 215–239.
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.
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.
García-Canal, E., & Guillén, M. F. (2008). Risk and the strategy of foreign location choice in regulated industries. Strategic Management Journal, 29(10), 1097–1115.
Ghoshal, S. (1987). Global strategy: An organizing framework. Strategic Management Journal, 8(5), 425–440.
Ghoshal, S., Moran, P., & Almeida-Costa, L. (1995). The essence of the mega-corporation. Journal of International and Theoretical Economics, 151(4), 748–759.
Goerzen, A., & Beamish, P. W. (2003). Geographic scope and multinational enterprise performance. Strategic Management Journal, 24(13), 1289–1306.
Gupta, A. K., & Govindarajan, V. (2000). Knowledge flows within multinational corporations. Strategic Management Journal, 21(4), 473–496.
Hadani, M., & Schuler, D. A. (2013). In search of El Dorado: The elusive financial returns on corporate political investments. Strategic Management Journal, 34(2), 165–181.
Heckman, J. J. (1979). Sample selection bias as a specification error. Econometrica, 47(1), 153–161.
Henisz, W. J. (2000). The institutional environment for economic growth. Economics and Politics, 12(1), 1–31.
Henisz, W. J., & Delios, A. (2001). Uncertainty, imitation, and plant location: Japanese multinational corporations, 1990–1996. Administrative Science Quarterly, 46(3), 443–475.
Henisz, W. J., & Macher, J. T. (2004). Firm- and country-level trade-offs and contingencies in the evaluation of foreign investment: The semiconductor industry, 1994–2002. Organization Science, 15(5), 537–554.
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.
Hillman, A. J. (2005). Politicians on the board of directors: Do connections affect the bottom line? Journal of Management, 31(3), 464–481.
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.
Hillman, A. J., Zardkoohi, A., & Bierman, L. (1999). Corporate political strategies and firm performance: Indications of firm-specific benefits from personal service in the US government. Strategic Management Journal, 20(1), 67–81.
Holburn, G. L., & Bergh, R. G. V. (2008). Making friends in hostile environments: Political strategy in regulated industries. Academy of Management Review, 33(2), 521–540.
Holburn, G. L. F., & Zelner, B. A. (2010). Political capabilities, policy risk, and international investment strategy: Evidence from the global electric power generation industry. Strategic Management Journal, 31(12), 1290–1315.
Huber, G. P. (1991). Organizational learning: The contributing processes and the literatures. Organization Science, 2(1), 88–115.
Jiménez, A. (2010). Does political risk affect the scope of the expansion abroad? Evidence from Spanish MNEs. International Business Review, 19(6), 619–633.
Jiménez, A., & Delgado-García, J. B. (2012). Proactive management of political risk and corporate performance: The case of Spanish multinational enterprises. International Business Review, 21(6), 1029–1040.
Jiménez, A., Luis-Rico, I., & Benito-Osorio, D. (2014). The influence of political risk on the scope of internationalization of regulated companies: Insights from a Spanish sample. Journal of World Business, 49(3), 301–311.
Julio, B., & Yook, Y. (2012). Political uncertainty and corporate investment cycles. Journal of Finance, 67(1), 45–83.
Julio, B., & Yook, Y. (2016). Policy uncertainty, irreversibility, and cross-border flows of capital. Journal of International Economics, 103, 13–26.
Keillor, B. D., Wilkinson, T. J., & Owens, D. (2005). Threats to international operations: Dealing with political risk at the firm level. Journal of Business Research, 58(5), 629–635.
Kobrin, S. J. (1978). When does political instability result in increased investment risk? Columbia Journal of World Business, 13(3), 113–122.
Kobrin, S. J. (1979). Political risk: A review and reconsideration. Journal of International Business Studies, 10(1), 67–80.
Kogut, B., & Singh, H. (1988). The effect of national culture on the choice of entry mode. Journal of International Business Studies, 19(3), 411–432.
Lawton, T., & Rajwani, T. (2011). Designing lobbying capabilities: Managerial choices in unpredictable environments. European Business Review, 23(2), 167–189.
Lawton, T., McGuire, S., & Rajwani, T. (2013a). Corporate political activity: A literature review and research agenda. International Journal of Management Reviews, 15(1), 86–105.
Lawton, T., Rajwani, T., & Doh, J. (2013b). The antecedents of political capabilities: A study of ownership, cross-border activity and organization at legacy airlines in a deregulatory context. International Business Review, 22(1), 228–242.
Levitt, B., & March, J. G. (1988). Organizational learning. Annual Review of Sociology, 14, 319–340.
Lieberman, M. B., & Montgomery, D. B. (1988). First-mover advantages. Strategic Management Journal, 9(1), 41–58.
Lux, S., Crook, T. R., & Woehr, D. J. (2011). Mixing business with politics: A meta-analysis of the antecedents and outcomes of corporate political activity. Journal of Management, 37(1), 223–247.
Madsen, P. M., & Desai, V. (2010). Failing to learn? The effects of failure and success on organizational learning in the global orbital launch vehicle industry. Academy of Management Journal, 53(3), 451–476.
Mauro, P. (1995). Corruption and growth. Quarterly Journal of Economics, 110(3), 681–712.
McGuire, S., Lindeque, J., & Suder, G. (2012). Learning and lobbying: Emerging market firms and corporate political activity in Europe. European Journal of International Management, 6(3), 342–362.
Mellahi, K., Frynas, J. G., Sun, P., & Siegel, D. (2016). A review of the nonmarket strategy literature: Toward a multi-theoretical integration. Journal of Management, 42(1), 143–173.
Metal Bulletin Monthly. (1998). South Africa’s long road to normality., 333, 12.
Metal Bulletin Monthly. (2005). Rewards in Africa, despite risks. 410, 26–27.
Nelson, R. R., & Winter, S. G. (1982). An evolutionary theory of economic change. Cambridge, MA: Harvard Business School Press.
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.
Oliver, C. (1991). Strategic responses to institutional processes. Academy of Management Review, 16(1), 145–179.
Oliver, C., & Holzinger, I. (2008). The effectiveness of strategic political management: A dynamic capabilities framework. Academy of Management Review, 33(2), 496–520.
Perkins, S. E. (2014). When does prior experience pay? Institutional experience and the multinational corporation. Administrative Science Quarterly, 59(1), 145–181.
Pfeffer, J., & Salancik, G. (1978). The external control of organizations: A resource dependence perspective. New York: Harper & Row.
Rajwani, T., & Liedong, T. A. (2015). Political activity and firm performance within nonmarket research: A review and international comparative assessment. Journal of World Business, 50(2), 273–283.
Rajwani, T., & Paroutis, S. (2013). Institutional conditions and political capabilities: An examination of airlines reactions to 9/11. Academy of Management Proceedings. doi:10.5465/AMBPP.2013.10958.
Reeb, D., Sakakibara, M., & Mahmood, I. P. (2012). From the editors: Endogeneity in international business research. Journal of International Business Studies, 43(3), 211–218.
Rui, H., Cuervo-Cazurra, A., & Un, C. A. (2016). Learning-by-doing in emerging market multinationals: Integration, trial and error, repetition, and extension. Journal of World Business, 51(5), 686–699.
Siegel, J. (2007). Contingent political capital and international alliances: Evidence from South Korea. Administrative Science Quarterly, 52(4), 621–666.
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.
Vaaler, P. M. (2008). How do MNCs vote in developing country elections? Academy of Management Journal, 51(1), 21–43.
Weidenbaum, M. (1980). Public policy: No longer a spectator sport for business. Journal of Business Strategy, 3(4), 46–53.
Xia, J. (2011). Mutual dependence, partner substitutability, and repeated partnership: The survival of cross-border alliances. Strategic Management Journal, 32(3), 229–253.
Zahra, S. A., Ireland, R. D., & Hitt, M. A. (2000). International expansion by new venture firms: International diversity, mode of market entry, technological learning, and performance. Academy of Management Journal, 43(5), 925–950.
Acknowledgements
This work was supported by Japan Society for the Promotion of Science KAKENHI Grant Numbers 15H06667 and 16H03658.
Author information
Authors and Affiliations
Corresponding author
Rights and permissions
About this article
Cite this article
Yasuda, N., Mitsuhashi, H. Learning from Political Change and the Development of MNCs’ Political Capabilities: Evidence from the Global Mining Industry. Manag Int Rev 57, 749–774 (2017). https://doi.org/10.1007/s11575-017-0318-y
Received:
Revised:
Accepted:
Published:
Issue Date:
DOI: https://doi.org/10.1007/s11575-017-0318-y