تأثیر ریسک سیاسی در حوزه بین‌المللی شرکت‌های کنترلی: بینش‌هایی از یک نمونه اسپانیایی

Political risk not only constitutes a threat for multinational enterprises but can also be a source of opportunities. Exposure to and accumulated experience dealing with political risk allows firms to better implement a wide set of political actions such as negotiation of entry conditions, lobbying, litigation, campaign contributions and coalition formation, leading to preferential conditions, reduced environmental uncertainty, reduced transaction costs and increased long-term sustainability to the firm. These advantages facilitate investments in countries with higher and more diverse levels of risk and make political risk to be positively associated with the firm's scope of internationalization. This effect is not homogeneous across firms. Drawing from a sample of 164 Spanish companies with investments in 119 countries, we find that the impact is greater for companies in industrial sectors that are the object of greater governmental regulation than it is for firms in non-regulated manufacturing or service sectors, with less frequent interactions with home and host-country institutions.

In April 2012, Mrs. Cristina Fernández de Kirchner, president of Argentina, announced the expropriation of 51% of the YPF oil company, owned at the time by the Spanish firm, Repsol. A few days later, the president of Bolivia, Mr. Evo Morales, announced the nationalization of the local subsidiary of another Spanish multinational company, Red Eléctrica de España. Political risk frequently materialized in recent times in an indirect – though equally pernicious – way through forced renegotiation of previously agreed conditions.3 Lately, however, some foreign governments have returned to direct measures in the form of nationalization or expropriation, highlighting the special relevance of political risk not only at the home country, but also in all host country locations where firms undertake Foreign Direct Investments (FDI). Political risk has traditionally been understood as a threat to multinational enterprises (MNEs), due to an increased probability of opportunistic behaviour by the public sector (Henisz, 1998, Williamson, 1975, Williamson, 1985 and Zelner, 1999). Adopting a bargaining power approach (Kobrin, 1987 and Vernon, 1971), several authors have pointed out that MNEs are vulnerable to expropriations, nationalizations, or unilateral modifications of the agreed conditions, when there is a shift in relative bargaining power from the firm to the government. This lower bargaining power can be caused as a consequence of technological obsolescence or the existence of high sunken costs. Conversely, the political institutions perspective (Henisz & Zelner, 2001) suggests that political risk is higher when authorities exercise greater political discretionality, due to the lack of restrictions on their behaviour. Recently, it has been claimed that political risk is not exclusively an exogenous variable but – at least partially – an endogenous one. Therefore, MNEs can implement strategies targeting not only the market environment but also the non-market environment, with an increasing attention on the political context (Bonardi et al., 2006, Hillman and Hitt, 1999, Hillman et al., 2004, Holtbrügge et al., 2007 and Oliver and Holzinger, 2008). Building on the resource and capability-based view of the firm (Barney, 1991, Helfat and Peteraf, 2003, Helfat et al., 2007 and Wernerfelt, 1984) and the non-market strategy literature (Doh et al., 2012 and Hillman et al., 2004), MNEs can develop political capabilities that allow them to interact with the authorities of the host country in more appropriate ways to achieve their strategic goals (Boddewyn and Brewer, 1994, Baron, 1995, Hillman and Hitt, 1999, Holburn, 2001, McWilliams et al., 2002, Wan, 2005 and García-Canal and Guillén, 2008). There is empirical evidence of the proactive management of political risk by those companies with greater political capabilities in order to gain advantages in locations characterized by higher levels of risk or unpredictable policy contexts. This has been the case in the U.S. electricity sector (Holburn, 2001 and Holburn and Zelner, 2010), the European air transport sector (Lawton and Rajwani, 2011 and Lawton et al., 2013), in Spanish MNEs (García-Canal and Guillén, 2008 and Jiménez, 2010), and in FDI flows from the South of Europe towards the North of Africa and Eastern Europe (Jiménez, 2011). Consequently, we contextualize this paper within the international strategy of Spanish MNEs given the demonstrated relevance and positive impact of political risk in the location of companies in regulated industries across Latin America (García-Canal & Guillén, 2008), the scope of the international expansion of MNEs (Jiménez, 2010) and corporate performance (Jiménez & Delgado, 2012). Drawing on the contributions of these authors, the objective of this paper is to analyze whether political risk has a diverse impact on internationalization strategy dependent on the particular industry to which the company belongs. Specifically, we propose that the overall impact of political risk on a firm's scope of internationalization will be positive, with regard to both the absolute level of risk of the different locations and the diversity of risks of the firm's FDI portfolio. We expect that this impact will be greater on those companies in regulated industries, given the superior development of their political capabilities in comparison with other companies. This is because the state plays a very active role in the regulation of these industries. This increases uncertainty and the unpredictability of the policy context and means that MNEs have to react and interact much more frequently with governments both from the home and from the host countries (Doh and Pearce, 2004 and Lawton et al., 2013). This broader experience and exposure allows firms to achieve a more accurate assessment of political risk, enhance negotiation, litigation and lobbying skills, choose better campaign contributions, form coalitions and political networks that facilitate access to information, resources and opportunities an even take advantage of corrupt systems. This, in turn, can provide preferential conditions when entering a country, reduced environmental uncertainty, lower transaction costs and increased long-term sustainability to the firm (Hillman, Zarkhoody, & Bierman, 1999). In contrast, political capabilities are relatively underdeveloped in companies from non-regulated industries, in which the state plays a much less relevant role, because interaction with the political institutions of the home and host countries is not as frequent. Combining the institutional approach with the resource-based view of the firm and the non-market strategy literature, this paper contributes to the literature on institutional environment and its impact on business management. Drawing from a sample of 164 Spanish companies with investments in 119 countries, we find that exposure to and previous experience dealing with political risk and political capabilities play a key role in international strategy. However, the influence varies across industries, being greater for companies in industrial sectors that are the object of greater governmental regulation than it is for firms in non-regulated manufacturing or service sectors, with less frequent interactions with home and host-country institutions. In addition, a second contribution lies in the supplementary empirical evidence we have gathered, to demonstrate that the firm should consider political risk and political environment as an opportunity rather than solely as a set of constraints or a source of potential threats (Oliver & Holzinger, 2008). In fact, companies can take advantage of opportunities arising both from the particular risk level of the locations and from the management of a diversified location portfolio. The remainder of the paper is structured as follows: in Section 2, we review the literature focused on political risk and political capabilities and we develop our hypotheses. Section 3 describes the sample, model, dependent, independent and control variables, and the collinearity diagnosis. Section 4 shows the results and the robustness tests. Finally, Section 5 presents the main conclusions, managerial contributions, limitations and future lines of research.

The present study has analyzed the influence of political risk in the internationalization strategy of Spanish MNEs, paying special attention to the relevance of the industry to which the firm belongs. Despite the fact that political risk has traditionally been considered a threat for MNEs, we suggest that exposure to and previous experience dealing with political risk can be useful sources to create political capabilities to, among other actions, negotiate, lobby and obtain preferential conditions in countries characterized by high levels of political discretionality or corruption. This facilitates FDI, even if the coordination of operations in a more diverse portfolio of political environments is more complicated. We found that there is a positive relationship between political risk and a firm's scope of internationalization. This relationship does not have the same impact across all firms. In fact, it will be stronger in those companies belonging to industries subjected to higher levels of regulation by the authorities. This is due to the fact that previous experience accumulated in earlier interactions with governments, either in foreign countries or at home, helps firms to create and develop political capabilities especially in sector where exposure to political risk is higher. In contrast, political capabilities are relatively underdeveloped in those firms belonging to non-regulated manufacturing or service industries where exposure is lower, because regulation has a less salient role and the interactions with authorities are less frequent. We have contributed to the literature on the role of institutions (North, 1981 and North, 1990), by explaining how the institutional environment, in this case the political context, affects corporate strategy and how this influence varies depending on the type of firm. The combined analysis of institutions and strategic management, as conducted in this paper, leads to a deeper and a more complete understanding of corporate behaviour and its environment (Cuervo-Cazurra & Dau, 2009). We have also contributed to the study of political risk and political capabilities by showing that not all firms are equally affected. Instead, those MNEs which belong to regulated industries tend to develop these capabilities more frequently compared to non-regulated industries. This result is consistent with the approach found in the literature, which has paid special attention to this particular set of industries (Fernández-Méndez et al., 2011, García-Canal and Guillén, 2008, Henisz and Zelner, 2001, Henisz and Zelner, 2002, Holburn, 2001, Lawton and Rajwani, 2011 and Lawton et al., 2013). In addition, we have also shown that political capabilities allow firms to invest in locations where the level of risk is higher, and also facilitate the management and coordination of an FDI portfolio characterized by a higher location diversity from which the firms can benefit.