Manufacturing discontent: National institutions, multinational firm strategies, and anti‐globalization backlash in advanced economies

Abstract

Research Summary There is mounting evidence of a widespread popular backlash against globalization in advanced economies, which can hurt multinational companies' (MNCs) interests. In this article, we argue that MNCs are both “culprits” and “victims” of backlash against globalization. Building on the comparative capitalism literature, we argue that national institutions influence the likelihood of a backlash by either encouraging MNCs to embrace a “labor arbitrage” strategy consisting in tapping into cheap labor markets overseas or preventing them from doing so. Where institutional constraints lead firms to adopt an “upgrading” route of using domestic workers, popular backlash is less likely. Such institutional factors help to explain variation in the likelihood of backlash across countries. We also discuss the strategic options available to firms facing backlash. Managerial Summary Multinational companies are increasingly facing a backlash against globalization that, in some countries, may lead to policies that directly hurt their interests. Yet little is known about the link of this phenomenon with firm‐level strategies. In this article, we draw on comparative capitalism analysis to show that national institutions play a key role in determining the likelihood of backlash. They do so by inducing/discouraging MNCs to adopt certain strategies that expose non‐university‐educated workers to globalization pressures, influencing, in turn, the electorate's attitude toward globalization. We also present and discuss the strategic options available to firms facing backlash.

Varieties of populism

“…While the last several decades reflected a resolution that was dominated more by the logic of the thesis, we see in the last several years a rise of the antithesis and the globalization of the local. This is reflected in Butzbach, Fuller, and Schnyder (2020) argument that local backlash with respect to globalization's effects on local constituencies can lead to pressure to engage in policy reversals, even in the face of the constraints of regional and global agreements.…”

“…Drezner's thesis that all “politics is global” has been challenged by the anti‐thesis of individuals like former Speaker of the U.S. House of Representatives Tip O'Neill (O'Neill & Hymel, ), who famously proclaimed that “all politics is local.” While the last several decades reflected a resolution that was dominated more by the logic of the thesis, we see in the last several years a rise of the anti‐thesis and the globalization of the local. This is reflected in Butzbach, Fuller, and Schnyder () argument that local backlash with respect to globalization's effects on local constituencies can lead to pressure to engage in policy reversals, even in the face of the constraints of regional and global agreements.…”

The trade policy response to COVID-19 and its implications for international business

“…This question has attracted surprisingly little attention in the international business literature. The recent work which has appeared has mainly focused on the broader concept of 'de-globalisation', rather than trade protectionism (Butzbach et al, 2020;Kobrin, 2017;Meyer, 2017;Moyo, 2019;Witt, 2019). This is surprising, as greater understanding of the implications of rising trade barriers for business strategy seems to us to be vital, if MNEs are to adapt their market and non-market strategies (NMS) to the new context (Baron, 1995).…”

Intro: Comparative Capitalism Research in Emerging Markets – A New Generation

“…Similarly, Allen et al, raise the important question of 'compossibility:' Can both China and India have thriving PV industries, or is there a necessary link between one country's success and the other's failure? Focus on such international linkages may become more important as international tensions and pressures for 'deglobalisation' keep growing not just between China and India, but among many countries (Butzbach et al 2019). The increased importance of international linkages also hints at possible contributions of CC theories to development studies most notably in combination with 'dependency theory' (Palma 1978).…”

“…The erstwhile models of Anglo-America entered the twenty first century with a string of financial crisesarguably spurred by a growing focus on value extraction by financial engineering rather than the production and sale of goods and servicesstarting with the Enron Scandal, the bursting of the Dot-com bubble, and culminating in the Global Financial Crisis. Increasingly, these crises also spilled over into the political realm, leading to right wing populists capturing the political agenda in the US and the UK (Butzbach et al 2019). Meanwhile, so-called Emerging Markets (EMs) have started to seriously challenge the post-war global economic order and the assumptions that the liberal market model represents the 'gold standard' for economic organisation.…”