Economic Nationalism and International Business

Economic Nationalism and International Business

Luis Alfonso Dau (Northeastern University, USA), Elizabeth M. Moore (Northeastern University, USA), Amílcar Antonio Barreto (Northeastern University, USA) and Maria A. Robson (Northeastern University, USA)
DOI: 10.4018/978-1-5225-7561-0.ch001

Abstract

The purpose of this chapter is to illuminate the importance of the biases and motivating factors that have propelled economic nationalist movements across the globe. Too frequently scholars assume economic nationalism as a starting point to understand strategic choices. The authors argue that ethnic and racial biases, however, are an important antecedent to economic nationalism that transitively impact firm strategic processes such as internalization. Specifically, they suggest that ethnic and racial tensions that exist within and between governments and people add unique pressure structures to which firms respond. Through a case study of South Africa, the authors highlight the impact that these pressure structures have on firm-level strategic processes surrounding internalization.
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Introduction

As the economic and political distances across the world continue to constrict, individuals, firms, and governments are experiencing both the positive and the negative externalities of globalization (Dau, Moore, & Soto, 2016; Mahatney, 2013). On the positive side, the world has experienced increased trade relations, cross-cultural exchange, and an unprecedented flow of knowledge across borders - all impacting firm behavior (Churie, Sjostedt, & Corell, 2005; Dau & Wesley, 2016). On the negative side, however, there have been increased natural disasters and health epidemics, man-made calamities in the form of terrorism and global financial collapses, resulting in a recent backlash towards globalization and a shift towards economic nationalism rooted in ethnic and racial biases (Abrahms, 2008; Economist, 2015; Dau, Moore, & Abrahms, 2018; Hopkins, 2017).

Despite the relevance and resurgence of nationalist economic policies and stratification for firm strategy and behavior (Dau, et. al., 2017; Helleiner, 2002), this phenomenon remains understudied in international business. Moreover, existing research fails to address the antecedents of economic nationalism, and how these different antecedents put different pressures on firms. Thus, in order to have a holistic understanding of firm behavior and strategy during the current rise of economic nationalism (Held, 2004), it is critical for scholars to look at the underlying forces that propagate the use of economic nationalism as a policy tactic. We fill this gap in the literature by first illustrating the motivating factors of economic nationalism and then discussing how these motivating factors inform the internalization processes of firms as they continue to navigate changing economic policy structures. What factors drive internalization by firms in emerging markets? In addition to market-based country-specific advantages, we demonstrate that economic nationalism influences firms’ internalization decisions.

Contemporary studies of globalization’s impact on economic nationalism center on the motivations of governments, policymakers, and entrepreneurs (Helleiner, 2002; Helleiner & Pickel, 2005). Infrequently do they examine non-elite promotion of economic nationalism (Hopkin, 2017). This omission is rather startling given that their popular support is what fuels this phenomenon. Moreover, this populist support from the bottom adds a unique pressures through which firms must navigate. There is a tendency among those who study economic nationalism to gravitate towards economic determinism (Akhter, 2007; Arnason, 1990). Under these circumstances the primary assumption behind the current wave is that this is a movement driven by those on the losing end of globalization.

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