Nationalism and populism are currently holding sway in the political landscape, not only in the US but also in many European countries. The British magazine “The Economist” sees a growing tendency for companies to emphasize their nationality in their communications with stakeholders such as investors, analysts, and customers. But what effects does this corporate flag waving have on companies’ business performance? WU researchers Alexander Mohr and Christian Schumacher have looked into this question. They investigated whether firms take advantage of nationalism and populism in their home countries by using patriotic rhetoric, for example stressing their commitment to creating domestic jobs, and if such flag waving leads to improved business performance.

Firms are rewarded or sanctioned by interest groups

For their study, the authors analyzed corporate communications using statements made by the CEOs of US firms during 20,458 conference calls with investors and analysts and looking at 12,260 press releases issued by these companies in the period from 2002 to 2015. The study, published in the journal Strategy Science, shows that companies which emphasize their commitment to act in line with the national interest in their communications do indeed perform better under certain conditions. As Alexander Mohr, professor at WU Vienna’s Institute for Export Management and one of the authors of the study, explains, “From what we can see, strong populist sentiment in a firm’s home country leads governments, consumers, and employees to expect a stronger commitment to national interests on the part of the company. Companies are rewarded by these groups if they live up to this commitment, or if it looks like they are living up to this commitment. Unpatriotic behavior is sanctioned, on the other hand: Governments cancel tax discounts, employees quit their jobs, and consumers boycott companies’ products and services.”

Flag waving backfires for companies that operate internationally

The results also show, however, that patriotic rhetoric has negative effects on performance in the case of companies that depend strongly on foreign markets. These firms are rewarded in their home markets but, at the same time, they are also sanctioned by governments, consumers, and employees in other countries. “Under certain circumstances, catering to nationalism and populism may be beneficial for firms operating mainly in the domestic market, but we see that this strategy backfires for companies with significant operations abroad, for instance export activities or international branch locations,” Professor Mohr points out.

The study: Mohr, Alexander & Schumacher, Christian (2019). The Contingent Effect of Patriotic Rhetoric on Firm Performance. Strategy Science 4(2):94-110. https://doi.org/10.1287/stsc.2019.0085

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Contact:
Anna Maria Schwendinger
PR-Referentin
phone: + 43-1-31336-5478
email: anna.schwendinger@wu.ac.at