@article{cfd123c6fbc440cbb3032f7a3e3bc5a9,
title = "The Impact of Political Risk on FDI Exit Decisions",
abstract = "Do political risks drive exit decisions by multinational companies (MNC)? What mechanisms can protect a multinational subsidiary in a host country that is characterized by weak institutions and high political risks? Using multinational plant-level data for Russia in the period 2000-2016 and applying the Cox proportional hazard model, we find significant effects from elevated host-country political risk when we compare the year of entry to the year of exit. MNCs are particularly sensitive to problems associated with law, order, and social conditions in Russia and the presence of the military in politics in the home country. Institutional similarity does not reduce the hazard of exits, and MNCs from high-risk countries exit less when home-country risk increases. Subsidiaries from countries that have imposed sanctions on Russia are less likely to exit, though sanctions interact with host-country risks, making them more severe. Being large and being part of a greenfield project help subsidiaries to build resistance against host-country political risks. These findings provide empirical evidence that support our conclusions regarding foreign direct investment volatility in countries with high risk.",
keywords = "Russia, exit, foreign subsidiary, multinational company (MNC), political risk, survival, transition economy",
author = "Ksenia Gonchar and Maria Greve",
note = "Funding Information: The authors thank the anonymous reviewers, who generously shared their ideas and made this publication possible. They are particularly grateful for the valuable suggestion on how to improve our measurement of institutional risks — the issue most open to debate in this strand of literature. Special thanks are due to our colleague, Dr. Philipp Marek, who provided encouraging support and motivating guidance at the initial stage of the research. The work also benefited from helpful suggestions and comments by Kseniia Gatskova, Joanna Tyrowicz, and other participants in the seventh annual conference of the Leibniz Institute for East and Southeast European Studies, Regensburg, in 2019. The authors thank the Basic Research Program of HSE University for financial support Funding Information: The authors thank the anonymous reviewers, who generously shared their ideas and made this publication possible. They are particularly grateful for the valuable suggestion on how to improve our measurement of institutional risks — the issue most open to debate in this strand of literature. Special thanks are due to our colleague, Dr. Philipp Marek, who provided encouraging support and motivating guidance at the initial stage of the research. The work also benefited from helpful suggestions and comments by Kseniia Gatskova, Joanna Tyrowicz, and other participants in the seventh annual conference of the Leibniz Institute for East and Southeast European Studies, Regensburg, in 2019. The authors thank the Basic Research Program of HSE University for financial support Publisher Copyright: {\textcopyright} 2022",
year = "2022",
month = jun,
doi = "10.1016/j.ecosys.2022.100975",
language = "English",
volume = "46",
journal = "Economic Systems",
issn = "0939-3625",
publisher = "Elsevier",
number = "2",
}