Effect of populism on the internationalization of emerging market firms

Abstract

PurposeThis paper aims to determine whether policy uncertainty caused by institutional decay in countries with populist rulers influences the internationalization decision of emerging market firms (EMFs).Design/methodology/approachThe study used binary logit analysis on firms from Latin American countries undertaking cross-border greenfield investment projects.FindingsThe results suggest that internationalization decision is demotivated by policy uncertainty generated by populist chief executives and promoted by that of political parties.Originality/valueThis study uses populist rhetoric to describe policy uncertainty due to chief executives and ruling parties, which influences internationalization decision by increasing anticipated transaction costs. This inquiry identifies populism as a variable that influences EMFs to internationalize, while empirically testing the claim of theoretical scholarship that populism reconfigured the sociopolitical and institutional forces that shape the world’s business. This study further advances institutional theory by offering a fresh perspective on the influence of home instead of host-country institutions on the internationalization motivation of firms due to institutional decay caused by populist regimes.