Something left to lose? Network preservation as a motive for protectionist responses to foreign takeovers

Abstract

International market integration reduces the overlap between economic and political borders, but what, exactly, does that imply? According to some rational choice accounts, it means that globalization will eventually undermine itself by triggering protectionist backlashes. Previous scholarship has highlighted flaws in the underlying assumption that elected politicians prioritize local stakeholders over anonymous shareholders. The present article adds that, regarding foreign takeovers, levels of protectionism would vary even if governments did prioritize local stakeholders, because stakeholder preferences vary across corporate governance regimes. Where, as in the UK, coordination relies more on market mechanisms than on networks, foreign acquisitions are less disruptive, and political mobilization against them is weaker. To the extent that the internationalization of corporate ownership spreads outsider governance by destroying networks, resistance therefore declines as the market expands. Quantitative correlational evidence is supplemented by case studies of bids for three British companies that provoked unusual levels of political mobilization.