Events

Dr. Yanbo Wang
Associate Professor of Management and Strategy
HKU Business School

Nationalism as an exclusionist sentiment is an important driver in policy formation that shapes cross border economic activities. Extensive studies assume that nationalism derived from traumatic history in the host country magnifies the liability of foreignness for multinational corporation operations through today’s hostile public opinions. Yet even casual observation suggests that the blocking role of nationalism in economic domains is not self-evident (e.g., the thriving Japanese FDI in China and South Korea; the solid trade partnership between France and the United Kingdom). In recognition that public opinions are subject to politicians’ manipulation (i.e., endogenous to policy formation), we argue instead that enactment of the nationalism against FDI is driven by the sentiment of individual politicians, which depends on the linkage between FDI introduction and their promotion. We test our ideas using the context of the city-level bureaucratic system of China. The city-level governments have a dual leadership structure comprising the Party secretary and the mayor. These two positions have a unique contrast between their incentive structures and their associated behavioral imperatives. We expose the stress between the individual and their organizational cage through our investigation of how a powerful nationalist sentiment imprinted by the Second Sino-Japanese War leads to variations in actions between these top two decision makers towards localized Japanese FDIs. We find that the Party secretary’s exclusionist sentiment changes behavior towards Japanese FDIs: when the Party secretary has stronger historical exposure to the war, Japanese FDIs are fewer. However, for a mayor imprinted in the same manner, this effect does not exist. The difference in actions emerges because the incentive structure in the Party secretary and mayor positions are different, even though they have responsibilities over the same jurisdiction.