When “The People” Meet the Multinational: How Populism Is Rewriting International Business
- Prof George Batsakis
- Jul 24
- 6 min read
Prior to entering foreign markets, multinational companies evaluate these markets using a relatively standard macroeconomic checklist that typically combines economic growth, labor costs, infrastructure, taxation, and political stability. Yet a new macro consideration has moved rapidly up the corporate agenda. Corporations now tend to question not only whether a country is economically attractive, but also whether its political leadership considers foreign companies legitimate actors in the national economy.
The rise of populism at a global scale has made this question increasingly relevant nowadays. Figure 1 below provides long-run evidence across 60 countries suggesting that populism is often serial, recurring in the same countries over time, with past populist rule strongly predicting its return and around half of recurring cases switching between left- and right-wing variants.
Figure 1. Populist leader spells by country: Recurring patterns.
Populist movements differ substantially across countries, but they usually present politics as a struggle between two well-defined groups. One group is known as the “ordinary people”. The second group is an establishment accused of serving its own interests. Multinational companies can easily become part of that establishment. Their size, foreign ownership, and international mobility make them convenient symbols of an economic system that many voters believe has failed to distribute its benefits fairly. And the result of it is something more than a heated political debate.
Therefore, populism can affect where companies invest, how they organize international operations, and whether they postpone or abandon otherwise attractive projects.
Globalisation’s political backlash
Before we go deeper into our discussion, we first need to understand the relationship between populism and international business. And in this regard, we must first consider why globalization generates political opposition.
Harvard economist Dani Rodrik (2018) argues in a study published in the Journal of International Business Policy that the populist backlash against globalization should not have been surprising. International trade, foreign investment, and financial integration may increase national income overall, but their benefits and costs are not shared equally. Some industries, regions, and workers gain considerably, while others experience job losses, wage declines, or prolonged economic decline. It’s two sides of the globalization coin.
The problem is therefore not necessarily that globalization offers no benefits to the host economies. It is that its gains may vary widely across nations, while its losses are highly concentrated within them. For example, a consumer may benefit slightly from lower prices, but a worker whose factory closes due to the rise in offshoring experiences an immediate, life-changing loss. As global economic integration advances, further liberalization of global markets may yield relatively small gains for the economy while imposing substantial adjustment costs on particular groups.
Economic deterioration alone, however, does not cause the form that populism takes. Rodrik (2018) distinguishes between the public demand for political change and the narratives supplied by political leaders. Some leaders direct dissatisfaction towards wealthy elites, financial institutions, and large corporations. Others focus on immigration, national identity, and foreign influence. The first direction tends to produce left-wing populism, while the second one is more commonly associated with right-wing populism. In both cases, political leaders give voters a story explaining who is responsible for their insecurity.
This distinction matters for international business because multinational companies may appear in either story. On one hand, they can be identified as powerful corporations benefiting at the expense of workers. On the other hand, they can be seen as foreign outsiders threatening domestic industries, employment, and identity. Figure 2 below shows that although we consider populism a more recent phenomenon, in reality, it has been on the rise for quite a few decades.
Figure 2. The rise of populism throughout years
From political anger to investment uncertainty
But what happens when a populist movement enters government? Recently published research by Alfonso Carballo Perez and Margherita Corina (2024), published in the Global Strategy Journal, examines the foreign direct investments of US multinational companies across 37 democratic countries between 1999 and 2020. Their research reveals an interesting finding: companies become less willing to invest when a populist leader is in power.
One explanation here is uncertainty. Foreign direct investment usually involves commitments that cannot be reversed easily. A factory, distribution center or regional headquarters cannot be moved overnight. Before committing capital, managers therefore need confidence that taxation, regulation, trade agreements, and property rights will remain reasonably predictable.
Populist leaders frequently promise to challenge existing institutions and rewrite the established “rules of the game.” Even when these threats do not become policy, they create uncertainty about what may happen next. Companies may respond by delaying investment, reducing their scale, or choosing a different target market.
Yet this effect is not equally strong everywhere. Carballo Perez and Corina (2024) find that strong national institutions can act as a protective hedge. Independent courts, effective checks and balances, and reliable investment protections make abrupt policy changes harder to implement. The rhetoric of a political leader may therefore appear less threatening when the wider institutional regime remains strong.
The characteristics of the company also matter. Highly internationalised firms tend to have greater experience of different regulatory and political environments. They may possess stronger risk-management capabilities, more financing options and greater flexibility to reorganise their international activities. Such companies are not immune to populist uncertainty, but they may be better prepared to manage it.
Not all populist governments are the same
Treating every populist government as equally hostile to international business would be a mistake. A recent study by Srividya Jandhyala, Vera Kunczer and Thomas Lindner (2026) published in the Journal of International Business Studies analyzes more than 23,000 foreign investments across 61 host countries. They find that companies were substantially less likely to invest in countries governed by strongly populist regimes. In their analysis, a highly populist government was associated with a 28% lower probability of receiving an investment than a government at the sample’s average level of populism.
More importantly, their study shows why the familiar division between left-wing and right-wing governments is insufficient. Two characteristics are particularly relevant: whether a government is pro-business and whether it is strongly opposed to immigration. A pro-business populist government may criticize political elites while still welcoming foreign companies that create employment, introduce technology, or support economic growth. In very business-friendly regimes, this positive orientation can even outweigh the general negative effect of populism.
An anti-immigration position has the opposite effect. Governments that emphasize threats from outsiders are more likely to evaluate multinational companies as carriers of foreign practices, employees, and influence. This can weaken their legitimacy, particularly when their operations depend on international managers, migrant labour or cross-border teams.
What should companies do?
These findings suggest that conventional political risk analysis is no longer sufficient. So, what companies and managers should do to protect themselves in this process:
Companies should examine not only whether institutions are stable, but also how political leaders define “the people,” “the elite” and “the outsider.”
Managers should avoid using broad labels such as left-wing, right-wing, or populist as substitutes for detailed analysis. They need to assess whether a government supports private enterprise, how it discusses foreign ownership and immigration, and whether its political rhetoric targets particular industries or countries.
Companies should also consider their own vulnerability. A business employing local workers and purchasing from domestic suppliers may be perceived differently from one relying heavily on expatriate managers and imported inputs. Building credible relationships with employees, communities and local partners is therefore not merely a public-relations exercise. It can become an important source of political legitimacy.
Finally, international flexibility matters. Firms with diversified operations, alternative suppliers and the ability to shift investment gradually are better positioned to respond when political rhetoric develops into regulatory action.
The new geography of international business
Populism does not necessarily signal the end of international investment. Some populist governments actively court multinational companies, particularly when foreign capital supports employment and economic growth. But investment decisions increasingly depend on more than market potential and formal legislation.
The deeper lesson is that globalization and populism are connected. Globalization can generate economic disruptions that feed populist politics; populist politics can then make international investment more uncertain. Companies are no longer merely responding to political risk. They may themselves become central characters in political narratives about sovereignty, fairness and national identity.
References
Carballo Perez, A., & Corina, M. (2024). Foreign direct investment in the context of rising populism: The role of institutions and firm-level internationalization. Global Strategy Journal, 14(1), 84–115.
Jandhyala, S., Kunczer, V., & Lindner, T. (2026). Populism, regime characteristics, and MNC location choice. Journal of International Business Studies.
Rodrik, D. (2018). Populism and the economics of globalization. Journal of International Business Policy, 1, 12–33.
