Partners with benefits: when multinational corporations succeed in authoritarian courts

Scholars often assume that courts in authoritarian regimes cannot credibly protect foreign investors' interests because these institutions lack judicial independence. In this article, we construct a novel data set on multinational corporations' litigation activities in Chinese courts from...

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Main Authors: Chen, Frederick R., Xu, Jian
Other Authors: S. Rajaratnam School of International Studies
Format: Article
Language:English
Published: 2023
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Online Access:https://hdl.handle.net/10356/170881
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Institution: Nanyang Technological University
Language: English
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spelling sg-ntu-dr.10356-1708812023-10-08T15:41:29Z Partners with benefits: when multinational corporations succeed in authoritarian courts Chen, Frederick R. Xu, Jian S. Rajaratnam School of International Studies Social sciences::Political science Authoritarian Regimes Government-Business Relations Scholars often assume that courts in authoritarian regimes cannot credibly protect foreign investors' interests because these institutions lack judicial independence. In this article, we construct a novel data set on multinational corporations' litigation activities in Chinese courts from 2002 to 2017. This supports the first systematic case-level analysis of foreign firms' lawsuit outcomes in an authoritarian judiciary. We find that foreign companies frequently engage in litigation in authoritarian courts. Moreover, we theoretically and empirically distinguish between two types of government-business ties in terms of their effectiveness in incentivizing the host state to protect foreign investors' interests. We argue that ad hoc, personal political connections deliver only trivial lawsuit success for multinational enterprises, while formal corporate partnerships with regime insiders can lead the state to structurally internalize foreign investors' interests. In particular, we demonstrate that joint venture partnerships with state-owned enterprises help foreign firms obtain more substantial monetary compensation than other types of multinational enterprises. By contrast, the personal political connections of foreign firms' board members do not foster meaningful judicial favoritism. These findings are robust to tests of alternative implications, matching procedures, and subsample robustness checks. This article advances our understanding of multinational corporations' political risk in host countries, government-business relations, and authoritarian judicial institutions. Ministry of Education (MOE) Published version This research is partially supported by the Ministry of Education, Singapore, under its Academic Research Fund Tier 1 (022637-00001). Frederick R. Chen acknowledges multiple research grants from the Department of Political Science at the University of Wisconsin–Madison. Jian Xu acknowledges generous financial support from Emory University. 2023-10-04T05:09:19Z 2023-10-04T05:09:19Z 2023 Journal Article Chen, F. R. & Xu, J. (2023). Partners with benefits: when multinational corporations succeed in authoritarian courts. International Organization, 77(1), 144-178. https://dx.doi.org/10.1017/S0020818322000297 0020-8183 https://hdl.handle.net/10356/170881 10.1017/S0020818322000297 2-s2.0-85149696837 1 77 144 178 en 022637-00001 International Organization © The Author(s), 2023. Published by Cambridge University Press on behalf of The IO Foundation. This is an Open Access article, distributed under the terms of the Creative Commons Attribution licence (https://creativecommons.org/licenses/by/4.0/), which permits unrestricted re-use, distribution, and reproduction in any medium, provided the original work is properly cited. application/pdf
institution Nanyang Technological University
building NTU Library
continent Asia
country Singapore
Singapore
content_provider NTU Library
collection DR-NTU
language English
topic Social sciences::Political science
Authoritarian Regimes
Government-Business Relations
spellingShingle Social sciences::Political science
Authoritarian Regimes
Government-Business Relations
Chen, Frederick R.
Xu, Jian
Partners with benefits: when multinational corporations succeed in authoritarian courts
description Scholars often assume that courts in authoritarian regimes cannot credibly protect foreign investors' interests because these institutions lack judicial independence. In this article, we construct a novel data set on multinational corporations' litigation activities in Chinese courts from 2002 to 2017. This supports the first systematic case-level analysis of foreign firms' lawsuit outcomes in an authoritarian judiciary. We find that foreign companies frequently engage in litigation in authoritarian courts. Moreover, we theoretically and empirically distinguish between two types of government-business ties in terms of their effectiveness in incentivizing the host state to protect foreign investors' interests. We argue that ad hoc, personal political connections deliver only trivial lawsuit success for multinational enterprises, while formal corporate partnerships with regime insiders can lead the state to structurally internalize foreign investors' interests. In particular, we demonstrate that joint venture partnerships with state-owned enterprises help foreign firms obtain more substantial monetary compensation than other types of multinational enterprises. By contrast, the personal political connections of foreign firms' board members do not foster meaningful judicial favoritism. These findings are robust to tests of alternative implications, matching procedures, and subsample robustness checks. This article advances our understanding of multinational corporations' political risk in host countries, government-business relations, and authoritarian judicial institutions.
author2 S. Rajaratnam School of International Studies
author_facet S. Rajaratnam School of International Studies
Chen, Frederick R.
Xu, Jian
format Article
author Chen, Frederick R.
Xu, Jian
author_sort Chen, Frederick R.
title Partners with benefits: when multinational corporations succeed in authoritarian courts
title_short Partners with benefits: when multinational corporations succeed in authoritarian courts
title_full Partners with benefits: when multinational corporations succeed in authoritarian courts
title_fullStr Partners with benefits: when multinational corporations succeed in authoritarian courts
title_full_unstemmed Partners with benefits: when multinational corporations succeed in authoritarian courts
title_sort partners with benefits: when multinational corporations succeed in authoritarian courts
publishDate 2023
url https://hdl.handle.net/10356/170881
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