Strategic Responses to Sanctions: A Quantitative Study of European Firms' Corporate Activity in Russia

Johannes David Bettecken, Peter D. Ørberg Jensen

Research output: Chapter in Book/Report/Conference proceedingArticle in proceedingsResearchpeer-review

Abstract

With the overwhelming part of scholarly literature on sanctions focused on the macro-political assessment of sanctions effectiveness this study construes of sanctions as an institutional pressure and makes the strategic response of European firms with Russian subsidiaries its focal point. Considering the sanctions episode following the Russia-Ukraine conflict a quasi-experimental setting we apply Propensity-Score Matching (PSM) and logit regression. From this analysis it emerged, that firms tend to go against the spirit of the sanctions and increase their Russian market presence. This seems to be driven by the relative economic importance of their respective subsidiary, the presence of non recoverable assets in Russia as well as the overall firm size. However, due to increased visibility and dependence on reputational cost associated with a greater firm size, we found a turning point in firm size upon which firms are more likely to comply than to challenge. With regards to the effectiveness of the sanctions regime, governments cannot count on firms to automatically act as economic agents to support the sanctions episode. This may undermine the potential effectiveness of the EU-Russian sanctions episode both as a tool to inflict economic pain and as a credible signal of deterrence.
Original languageEnglish
Title of host publicationProceedings of the 60th Annual Meeting of the Academy of International Business
EditorsJT Li, Tunga Kiyak
Number of pages37
Place of PublicationEast Lansing, MI
PublisherAcademy of International Business
Publication date2018
Publication statusPublished - 2018
EventAIB 2018 Annual Meeting: Global Business and the Digital Economy - Hyatt Regency Minneapolis, Minneapolis, United States
Duration: 25 Jun 201828 Jun 2018
Conference number: 60
https://aib.msu.edu/events/2018/

Conference

ConferenceAIB 2018 Annual Meeting
Number60
Location Hyatt Regency Minneapolis
CountryUnited States
CityMinneapolis
Period25/06/201828/06/2018
Internet address
SeriesAcademy of International Business. Annual Meeting. Proceedings
ISSN2078-4430

Bibliographical note

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Keywords

  • Business-government interactions
  • MNE-home government relations
  • Formal and informal institutions
  • Legitimacy of business practices
  • Political risk
  • Political ties

Cite this

Bettecken, J. D., & Jensen, P. D. Ø. (2018). Strategic Responses to Sanctions: A Quantitative Study of European Firms' Corporate Activity in Russia. In JT. Li, & T. Kiyak (Eds.), Proceedings of the 60th Annual Meeting of the Academy of International Business Academy of International Business. Academy of International Business. Annual Meeting. Proceedings