Knowledge that Transforms

Abstract Populism is a political phenomenon that attempts to harness existing institutions for populist ends, often leading to negative consequences for businesses. However, can national institutions resist this pressure and mitigate the damage to firms? This paper investigates how populist electoral success influences corporate investment, unraveling the intricate connection between a country’s political institutions and the investment behavior of companies. Through the lens of political uncertainty and transaction cost economics, we theorize that countries with fortified checks and balances—facilitated by electoral systems (situated at the entrance to power), judicial independence (supervising the exercise of power), and government accountability (serving as ex-post checks)—effectively mitigate populist impulses. However, these checks and balances are also often targeted by populist leaders, as they prevent full implementation of a populist agenda. Analyzing a dataset spanning over 36,000 firms across 42 countries from 1995 to 2021, we find that existing checks and balances shield firms from populist excesses. In line with our theory, the longer a ruler is in power, the weaker these checks and balances remain. Our study highlights populism’s harm to business and the role of robust political institutions as mitigating factors.

Abstract Digitalization and global disruptions have fundamentally changed how we approach work. Global virtual work has become increasingly widespread in recent years, often replacing or complementing traditional expatriation and international business travel. To advance our understanding of this phenomenon, we systematically reviewed the literature on global virtual work, distinguishing it into three domains: global virtual teams, distributed work, and the use of digital technologies. For each domain, we examined key actors, their objectives, underlying theories, methodologies, and findings. The first domain provides insights into the antecedents, moderators, and mediators of the effectiveness of global virtual teams. The second domain explores individual and organizational research on diverse distributed work arrangements, such as offshoring, global platforms, and global nomads. The third domain addresses the enabling and moderating roles that digital technologies play in facilitating global virtual work. Synthesizing prior research, we developed a multilevel conceptual framework that integrates inputs, processes, and outcomes of global virtual work, offering novel perspectives. We outlined promising opportunities for future research across four themes: people, technology, context, and time. Additionally, we examined the practical implications of our findings for policymakers, managers, and individual workers as they navigate the evolving landscape of global virtual work.

Abstract Drawing on a sociological approach, this paper examines how the subsidiaries of multinational companies (MNCs) translate equality, diversity, and inclusion (EDI) ideas from their headquarters (HQs). International business (IB) studies emphasize the context-sensitive and socially constructed nature of EDI. Through a single case study of an Italian subsidiary translating EDI ideas from its U.S. HQs, we present a power-laden EDI translation process and broaden the extant research by revealing the power relations underlying the EDI translation process. We portray the sociology of MNCs in which different professional categories engage in “translation spaces”, i.e., social spaces where they interact throughout various phases of the translation process. Specifically, we identify two key phases: the signification and negotiation phases. In these phases, intentional and unintentional translators play varying roles in either facilitating or hindering the translation of EDI ideas within the subsidiary. Thus, we first advance the sociology of EDI translation in IB by revealing how EDI understanding is constructed and reconstructed through the interactions of translators. Second, we contribute to translation research in IB by depicting the iterative and recursive nature of the translation process. Finally, we reveal forms of resistance to EDI and the emergence of new power relations shaped by professional diversity within the subsidiary, unearthing the generative nature of the EDI translation process in MNCs.

Abstract Many African economies face high debt levels, yet local firms have unique growth opportunities requiring external financing. We examine whether government borrowing constrains corporate financing in Africa and how these effects differ by debt source. Using a manually collected dataset from 29 African countries (2000–2019), we uncover financing patterns that challenge conventional theories. In sharp contrast to firms in developed markets, we find that African firms experience a “crowding-in” effect when governments borrow externally, enhancing their access to debt. In contrast, domestic government borrowing induces the typical crowding-out effect, where government borrowing reduces corporate access to debt. The crowding-in phenomenon is most evident among publicly listed firms, particularly those cross-listed on foreign exchanges (the multinationals). The effect strengthens in countries with higher Eurobond market activity and intensifies following sovereign credit downgrades, underscoring the sovereign ceiling’s constraint on corporate borrowing. Our findings contribute significantly to international business literature by revealing how African debt markets function differently, highlighting unique financing challenges faced by African multinational enterprises, and demonstrating that economic principles established in developed markets cannot be universally applied to emerging economies. These insights are crucial for designing effective policies to support corporate growth in Africa.

Abstract A thriving international cultural industry fuels the expansion of the global creative economy. Yet, what drives the international diffusion and performance of cultural products? This study adopts a social influence perspective to examine the international performance of film exports, addressing a critical gap in existing research that often isolates social influences without considering the impact of their (in)congruence. Given the subjective nature of cultural products and their vulnerability to multiple influences across global value chains, we theorize and empirically test the effects of congruence and incongruence between supply-side and demand-side social influences on films’ international performance. Analyzing 1676 U.S. films released between 2009 and 2018, our findings reveal that congruence between supply-side and demand-side social influences significantly enhances a film’s appeal, credibility, and international success. Moreover, this effect is amplified by two key moderators across global value chains, namely, upstream home-country adoption of social media promotion and downstream host-country press freedom. This study contributes to the understanding of the social influence view within global value chains by highlighting the importance of supply-demand congruence and the contextual factors that shape their effectiveness in driving the international performance of cultural products.

Abstract How do host country stakeholders evaluate foreign MNEs’ local impact? Although MNEs’ desire for a reputation for positive societal impact is well-established in the literature, much less is known about how to actually obtain one—especially in less developed frontier markets. In this inductive, qualitative study across seven countries in sub-Saharan Africa, we examine why host country stakeholders deem some foreign MNEs to have a better reputation for societal impact than others and how firms’ actions and attributes influence these stakeholder perceptions. Leveraging signaling theory, we identify three distinct types of signals (compatible, crossed, and conflicting) and three critical factors (benefit diffusion, empowerment, and hybrid solutions) that shape MNEs’ reputation for societal impact. We also shed light on the role of contextual factors at the country, industry, and community levels. In addition to these theoretical contributions, our study also yields practical implications for MNEs of including local stakeholders’ perspectives when crafting market and nonmarket strategies, fostering constructive communication between headquarters and subsidiaries as well as between expatriate and local actors, and finding ways of going beyond ‘fitting in’ to instead ‘stand out’ in order to gain a reputation for providing tangible and intangible forms of societal impact in frontier markets.

Abstract Africa’s startup ecosystem is growing rapidly, yet venture capital (VC) funding remains disproportionately allocated to non-African founders. This study investigates the factors driving this disparity, focusing on institutional voids – gaps in legal frameworks, financial infrastructure, and market-supporting institutions – and investors’ perceptions of risk and financial discrimination. We conducted 37 interviews with investors and entrepreneurs to identify the determinants of VC funding, including startup location, founder origin, and international networks. Additionally, a qualitative comparative analysis of 335 African fintech startups revealed the factor configurations that enable startups to secure high levels of VC investment. Historically, the findings reveal that non-African founders have benefited from investor homophily, a preference for investing in individuals with similar backgrounds, to mitigate the perceived risks related to institutional voids. By contrast, African founders faced greater barriers to funding. However, as Africa’s VC ecosystem has matured, local founders have begun to overcome these obstacles. By linking institutional voids to homophily and embedding a postcolonial perspective, acknowledging how historical power dynamics and colonial legacies shape investor perceptions and market structures, this study sheds light on the systemic biases that shape VC funding. These findings offer actionable insights for investors, policymakers, and entrepreneurs aiming to foster a more inclusive VC landscape.

Abstract A substantial body of research highlights how stringent regulations disrupt innovators’ incentives and increase transaction costs, yet their information processing implication remains understudied. Building on information processing theory, we study how the interplay between formal and informal institutions shapes inventors’ information processing in developing artificial intelligence (AI) innovation. We examine the effect of stringent privacy regulations on AI innovation by exploiting the European Union’s General Data Protection Regulation (GDPR) announcement. We argue that, following the GDPR announcement, GDPR-affected countries experience lower national AI innovation rates than unaffected countries. Further, we postulate that this negative effect is weaker in GDPR-affected countries, marked by higher levels of individualism, masculinity, and indulgence, but stronger in the affected countries with higher levels of uncertainty avoidance, power distance, and long-term orientation. Our difference-in-differences analysis supports the proposed framework. Our research contributes to the international business literature by developing novel theoretical predictions at the intersection of comparative institutional analysis and national culture, explaining how privacy protection laws and cultural factors shape AI inventors’ information processing. Finally, this study provides insights into how inventors and entrepreneurs in countries with stringent privacy laws can leverage national culture to shape their AI innovation strategies and inform strategic decision-making.

Abstract Building upon the upper echelons theory of organizations as applied to internationalization strategies, we investigate the impact of foreign-origin top management team (TMT) members on their companies’ location choice. We propose that a manager-from-target effect may exist, by which a manager’s knowledge of their country of origin increases the likelihood of choosing that country as a target. We expect it to be stronger for acquisitions than for greenfield investments, the inputs of foreign-origin managers being more relevant in the first case. Based on a large sample of foreign direct investment from 2013 to 2019, and using name analysis to identify TMT members’ origins, we find that the effect is present in both establishment modes but larger and more robust for acquisitions. It is also larger in companies with less diverse TMTs, for which targeting one manager’s country of origin instead of others’ may be less likely to cause conflict. Future research should explore whether investments in locations suggested by managers from the target country outperform others. If this is the case, it implies that recruiting foreign-origin top managers can improve a company’s internationalization strategy via better location choices.