How do MNCs vote in developing country elections

Research on multinational corporations (MNCs) and host government political risk in developing countries has largely ignored local electoral politics, economic policies, and the MNC investment incentives they may generate. In response, I develop and test a framework for understanding MNC risk and investment behavior based on political business cycle considerations. Analyses of 408 MNC investments worth $199 billion in 18 developing countries holding 35 presidential elections from 1987 through 2000 are consistent with these considerations: MNCs perceive higher (lower) risk and announce fewer (more) investment projects as right-wing (left-wing) incumbents appear more likely to be replaced by left-wing (right-wing) challengers. Management research over five decades has in-vestigated political risk and investment behavior related to the divergent interests of foreign-domi-ciled multinational corporations (MNCs) and host governments in developing countries. Robinson (1963) identified political risk to international firms operating in newly independent and “nation-alistic ” countries with occasional interest in breaching contracts or outright expropriation of firm assets. Vernon (1971) called attention to polit-ical risk associated with “obsolescing bargains ” be-tween investing MNCs and developing country host governments over time. Kobrin (1979, 1987) articulated different components of political risk associated with a “bargaining hypothesis ” and dif-ferent MNC responses intended to mitigate that risk. A general decline in expropriations during the 1980s and 1990s (Minor, 1994) coincided with new research directions regarding strategic actions de-veloping country host governments might take to attract larger shares of foreign investment (Murtha & Lenway, 1994) and what legal policies (LaPorta, Lopez-de-Silanes, Shleifer, & Vishny, 1998), eco-nomic policies (Murtha, 1993), and political insti-tutional arrangements (Henisz, 2000) might con-strain government actions. In the 2000s, interest remains strong in under-standing these topics: how governments matter for business investment incentives (Ring, Bigley, D’Aunno, & Khanna, 2005); how MNC investment decisions in emerging economies differ from those in industrialized democracies generally (Hoskis