Legitimacy Spillovers and Political Risk: The Case of FDI in the East African Community
研究了中国、美国、印度和欧洲企业在东非投资时，因母国来源导致的合法性溢出如何影响其政治风险，发现同国企业间及跨国间的合法性溢出会系统性地改变企业面临的政治风险。
Research Summary In order to successfully invest abroad, firms must consider how their actions will affect their acceptance by host country stakeholders such as the government and host society. When perceived as more legitimate, firms will likely experience less political risk; greater illegitimacy will likely result in more political risk. Importantly, such stakeholders often form similar opinions about firms from the same home country—resulting in legitimacy spillovers within a given host environment across similar firms. Moreover, stakeholders in one country form opinions of firms based on their actions in other countries, resulting in across‐country legitimacy spillovers. This article examines legitimacy and illegitimacy spillovers encountered by Chinese, American, Indian, and European firms in East Africa, which resulted in differences in their acceptance and their political risk. Managerial summary Although the literature has begun to consider how firms’ legitimacy affects their political risk, the role of legitimacy spillovers has not been addressed. Using the legitimacy‐based view of political risk and the literature on cognition and social judgments, we develop theory about how within‐country and across‐country spillovers of legitimacy (or illegitimacy) based on firms’ home country origins can affect their political risk. We examine the case of FDI in six East African countries that have experienced a rapid increase in foreign investment despite the presence of political risk. This case shows evidence of legitimacy spillovers resulting in systematic variation in firms’ political risk. Moreover, we find an important role for moderating factors such as the media, historical ties, and distance between countries. Copyright © 2016 John Wiley & Sons, Ltd.