Prensenter: Joao Albino-Pimentel

Associate Professor
Darla Moore School of Business, USC

Presentation:

Unexpected Dilemmas: MNE Divestitures as Strategic Responses to Controversial Host-Country Legislation

Authors: 

ABSTRACT

How do multinational enterprises (MNEs) respond when host countries enact legislation that conflicts with their prevailing stakeholder values? We address this question by examining the impact of host-country anti-LGBTQ laws, a type of regulation that, while seemingly neutral operationally, generates legitimacy risks for MNEs by creating misalignment between global, home and host-country stakeholder values. Drawing on panel data covering 513 U.S. MNEs and 141,013 subsidiaries across 143 countries (2009–2021), we find that exposure to newly enacted anti-LGBTQ laws significantly increases subsidiary divestiture rates. This baseline effect is reduced for MNEs with lower vulnerability to external stakeholder pressures, namely for those headquartered in LGBTQ-conservative home environments and for those with formalized internal inclusion policies. Our findings introduce controversial host-country institutions as a distinct category of divestiture driver, one that operates through legitimacy rather than efficiency logics. We thereby extend global strategy research beyond conventional economic and political risk frameworks, showing that moral contestation over social policy can reshape MNE portfolio decisions.