Manufacturing Discontent: National Institutions, Multinational Firm Strategies, and Anti-Globalization Backlash in Advanced Economies

Abstract

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.

Keywords: anti-globalization, globalization, backlash, varieties of capitalism, VOC, comparative capitalism, Trump, Brexit, inequality, political economy, international business, strategy

JEL Classification: P51, P52, F15, F23