A review of the internationalization of state-owned firms and sovereign wealth funds: Governments’ nonbusiness objectives and discreet power

We review and bridge the literature on the internationalization of state-owned firms and sovereign wealth funds to provide a novel understanding of how governments’ nonbusiness objectives affect foreign investments. We explain how governments as foreign investors behave differently from private ones because they need to balance politicians’ nonbusiness objectives and firms’ business goals. This results in competing arguments on whether the government helps or hinders internationalization. Building on the review, we provide suggestions as to how to extend research topics and theories of the firm by incorporating these nonbusiness objectives in the internationalization decision. Finally, we capture how governments may use state-owned multinationals and sovereign wealth funds to nudge host country governments by introducing the concept of discreet power, outlining the beginning of a unified approach to how governments use their foreign investments to achieve nonbusiness goals.