Assessing the Role of Host Country Human Rights Protection on Multinational Enterprises’ Choice of Investment Strategy

Abstract

Although international business studies have examined the role of non-market factors in multinational enterprises’ (MNEs) foreign ownership, there is a limited focus on the role of host country human rights records on MNEs’ ownership decisions. Further, there is little understanding of the differences in ownership decisions between the developed country multinational enterprises (DMNEs) and emerging-market multinational enterprises (EMNEs) as influenced by the non-market context of their host countries. This study, therefore, explores the links between the host country’s human rights governance and MNEs’ ownership strategy in cross-border acquisitions. We argue that clarity in human rights governance in the host country will encourage MNEs to establish higher stakes in local targets and that this relationship will be stronger for DMNEs than for EMNEs. Our findings, which support these hypotheses, offer insights into the relationship between MNE investment strategy and human rights governance, and inform the debate on the differences between internationalization strategies of EMNEs and DMNEs.