Exiting Russia

• In Event: Firms in International Political Economy

Abstract

Russia’s invasion of Ukraine caused a bloc of countries to impose harsh economic sanctions on Russia that have disrupted international business and raised the risks to operating there. Multinational corporations (MNCs) already in Russia face difficult decisions over whether, or to what extent, to exit. In this article, we examine the considerations behind MNCs’ exit decisions by building an original data set of the universe of MNCs operating in Russia and their behaviors in the wake of the invasion. We collect information on firm statements and actions by analyzing hundreds of thousands of news articles and other media reports, which we cross-reference with lists and qualitative information from Russian, Chinese, German, American, and other sources.

We theorize that firms’ exit decisions are driven by their nationality, in both obvious and nuanced ways. At baseline, MNCs from sanctioning states are more likely to exit than those from non-sanctioning states. However, because MNCs are non-state actors, they have decision-making autonomy that is not directly determined by the choices of their home governments. We expect other home-country-tied phenomena, such as consumer backlash and the political salience of MNCs’ activities to domestic politics, to explain variation occurring across MNCs from "the West." Additionally, MNCs that are more dependent on factors under Russia’s control, including immobile assets and domestic Russian suppliers, should be more likely to delay and/or limit their divestment even under home country pressure to do so.

This study contributes to the literature by examining the heterogeneity of firm responses to a common shock. Our empirical approach makes clear the depths of heterogeneity even and especially in light of remarkably strong and coordinated economic sanctions. Our theory illustrates the conditions under which nationality influences MNC behavior, without forgetting that MNCs are non-state actors in the international political economy.

Authors

• Rachel Wellhausen, University of Texas at Austin

• Boliang Zhu, Pennsylvania State University