AIB 2012 Conference Proceedings - Academy of International ...

MONDAY
Session: 2.1.15 - Interactive
Track: 1 - Institutions, Governance, and CSR
Politicians and Political Dynamics in International Business
Presented On: July 2, 2012 - 09:00-10:15
Chair: George O. White III, Old Dominion University
Why MNCs Should Invest in Foreign Countries During Political Elections
Charles Harrison, University of Pennsylvania
Raed Elaydi, Roosevelt University
As foreign direct investment (FDI) by multinational corporations (MNC) has dispersed to desolate regions of the
globe, the significance of acquiring idiosyncratic host-country information has increased (Javernick-will & Scott,
2010). Embedding within and learning from the host-country institutional landscape has been shown to
promote favorable outcomes related to foreign direct investment (FDI) strategy (Orr & Levitt, 2011, cited in
Scott, Levitt, & Orr, 2011). However, this process is generally viewed as slow and incremental. This discussion
presents a novel and practical, process-based narrative strategy for acquiring information pertaining to hostcountry
investment climates. Pre-entry (prior to formal project proposal) via short-duration immersion and data
gathering in contexts mired with political contestation such as presidential elections is presented as the
alternative. (For more information, please contact: Charles Harrison, University of Pennsylvania, USA:
harrison.charles.e@gmail.com)
Contagion and Risk Management Strategy: Navigating Exogenous Shocks in the Global Business Environment
J. Cameron Verhaal, University of Utah
Karin Fladmoe-Lindquist, University of Utah
We introduce a capabilities-based approach to managing the negative effects of contagion and international
crisis. Ultimately, the investment profile of an MNC in both a host country and the region is affected by the
firm's ability to respond to unstable economic, political and social contexts. The mechanisms used to manage
these contexts represent firm-specific capabilities. We identify three: deliberate learning and cognitive search,
firm-specific political resources, and redeployment of resources. Moreover, we argue that these capabilities are
moderated by both the nature of the investment (i.e. location and asset-specific investments) and crossnational
distance considerations. Ultimately, our conceptual framework of contagion management attempts to
unpack the micro and meso-level mechanisms that surround what has been largely understood as a
macroeconomic phenomenon. We also highlight the need to view both an MNC's actions and the multiple
institutional environments that they operate in as highly interdependent. Finally, we argue that the implications
of this research can help firms to identify potentially volatile and uncertain investment environments, ex ante,
as well as manage environments that have already been struck by economic, political or social crises associated
with contagion. (For more information, please contact: J. Cameron Verhaal, University of Utah, USA:
cameron.verhaal@business.utah.edu)
Political Economy and Financial Architecture
Raj Aggarwal, University of Akron
John W. Goodell, University of Akron
While it is clear that some countries are bank oriented and others rely more on equity financing, there is little
research on the degree to which national political economies determine the national architecture for financial
intermediation. Using data for a recent fourteen-year period for thirty-six countries, we document that financial
AIB 2012 Conference Proceedings
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