Periodic Reporting for period 1 - MICROPOPULISM (The micro-foundations of macro-institutions: an empirical investigation of the co-evolution of populist rhetoric and organizations)
Reporting period: 2023-11-01 to 2025-10-31
In recent years, populist movements such as the “Brexiteers” in the UK, Fidesz in Hungary, and Italy’s Five Star Movement have changed the political landscape in Europe. Populist leaders often challenge established economic policies and institutions, reshaping public perceptions of what is acceptable in politics and business. These movements not only challenge institutions but also alter the environments in which multinational enterprises (MNEs) operate. Despite extensive research on how institutions influence MNE behavior, little attention has been given to the political actors and rhetoric that define these institutions. This project fills this gap by examining how populist leaders, through their discourse, ideology, and personal characteristics, affect foreign direct investment (FDI).
Populist rhetoric signals potential institutional instability, regulatory unpredictability, and shifting norms about globalization and business. Yet its effects are heterogeneous: populist leaders differ in ideology, attitudes toward markets and global integration, and personal traits. The project explores how these variations, particularly in gender and education, shape the impact of populism on FDI. Female leaders may pursue more cooperative and pragmatic governance, reducing risk for foreign investors, while leaders with international education may balance nationalist rhetoric with economic pragmatism.
At the same time, the project recognizes that MNEs are not passive actors. Through employment, investment, and corporate political activities or corporate social responsibility initiatives, they influence the economic and social conditions that can either fuel or mitigate populist sentiment. This co-evolutionary relationship, where MNEs both shape and are shaped by populist environments, remains underexplored. The project introduces a dual-pathway framework linking the “supply side” of populism (leaders’ rhetoric and signaling of institutional change) and the “demand side” (public sentiment and stakeholder activism reacting to globalization and corporate behavior).
This study examines the co-evolution between populism and MNEs, revealing how political rhetoric and corporate strategies mutually shape each other and is important in three ways. First, provides a better understanding about the microfoundations behind institutions. Second, it advances understanding of how political actors shape business environments and provides concrete evidence of how populist rhetoric, in combination with individual characteristics, influences where and how companies invest. Third, this study introduces a dual-pathway framework showing how MNEs shape populist rhetoric by simultaneously creating local economic and social grievances and influencing political discourse through their activities.
Populist rhetoric signals potential institutional instability, regulatory unpredictability, and shifting norms about globalization and business. Yet its effects are heterogeneous: populist leaders differ in ideology, attitudes toward markets and global integration, and personal traits. The project explores how these variations, particularly in gender and education, shape the impact of populism on FDI. Female leaders may pursue more cooperative and pragmatic governance, reducing risk for foreign investors, while leaders with international education may balance nationalist rhetoric with economic pragmatism.
At the same time, the project recognizes that MNEs are not passive actors. Through employment, investment, and corporate political activities or corporate social responsibility initiatives, they influence the economic and social conditions that can either fuel or mitigate populist sentiment. This co-evolutionary relationship, where MNEs both shape and are shaped by populist environments, remains underexplored. The project introduces a dual-pathway framework linking the “supply side” of populism (leaders’ rhetoric and signaling of institutional change) and the “demand side” (public sentiment and stakeholder activism reacting to globalization and corporate behavior).
This study examines the co-evolution between populism and MNEs, revealing how political rhetoric and corporate strategies mutually shape each other and is important in three ways. First, provides a better understanding about the microfoundations behind institutions. Second, it advances understanding of how political actors shape business environments and provides concrete evidence of how populist rhetoric, in combination with individual characteristics, influences where and how companies invest. Third, this study introduces a dual-pathway framework showing how MNEs shape populist rhetoric by simultaneously creating local economic and social grievances and influencing political discourse through their activities.
The project advanced in three main phases, combining theoretical, quantitative, and qualitative analyses to understand the interdependency between populist rhetoric, leadership characteristics, and multinational enterprise (MNE) investment behavior. First, theoretical and conceptual development: A comprehensive framework was developed integrating institutional theory, upper echelon theory, and international business research to examine how different varieties of populist ideas affect MNE decision-making. Building on the cosmopolitan-parochial spectrum, propositions were formulated linking populist rhetoric, leader characteristics (gender, education), and foreign direct investment (FDI). Second, quantitative analysis: For the empirical testing I used 44,611 observations (2013-2020) from the Orbis Crossborder database, combined with data from the Manifesto Project, The PopuList, and TAP Index. Hierarchical generalized linear models revealed that parochial populist rhetoric significantly reduces inward FDI, but this effect is moderated by leader gender, female populists mitigate adverse impacts, while education shows limited influence. Third, qualitative exploration and abductive theorizing: To capture co-evolutionary dynamics, semi-structured interviews with MNE managers across diverse industries and countries were conducted. Through abductive reasoning and iterative coding, the analysis uncovered that MNEs’ corporate social responsibility and political activities influence local populist rhetoric, shaping institutional perceptions in host countries.
This study advances the state of the art by uncovering how populist rhetoric, leadership characteristics, and multinational enterprise (MNE) behavior co-evolve, offering a more nuanced understanding of institutions and political risk in international business. First, it moves beyond the traditional left-right political spectrum by conceptualizing populism along a cosmopolitan–parochial dimension and demonstrating how populist rhetoric signals both institutional uncertainty and domestic stakeholder reactions. The findings show that parochial populism significantly reduces inward foreign direct investment, yet female populist leaders mitigate this effect, while foreign-educated leaders exhibit more pragmatic approaches to economic governance. Second, by integrating upper echelon theory and institutional theory, the study introduces a micro-foundational perspective, emphasizing that institutional effects depend on the individual traits of political leaders rather than abstract policy frameworks. This provides theoretical clarity on how leader-level attributes shape the perceived stability and attractiveness of national business environments. Finally, the project develops a novel dual-pathway model linking MNE activities to the evolution of populist sentiment. It shows how firms may unintentionally fuel populist backlash through automation or offshoring but can also counteract it through responsible corporate engagement. These insights open several avenues for future research, including cross-regional comparisons, the role of political leader characteristics, and how MNE strategies influence populist supply side.