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

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 paper 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 paper, 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 towards globalization. We also present and discuss the strategic options available to firms facing backlash.