The Advantage of Outsiderness: MNEs’ Responses to Decolonization in Historical Perspective

This paper examines the political strategies of two German firms—Siemens’ and I.G. Farben—in interwar India as a way to consider how multinational enterprises (MNEs) deal with political risk. The interwar period was characterized
by rising political risks throughout the global economy, as conflicts between developed national economies rose in the wake of World War I, as anti-­‐colonial and communist movements gained ground, and international monetary
instability increased. Yet, far from retrenching from the global economy, German MNEs capitalized on the growing political risks by developing political strategies and cultivating political capabilities that allowed them to successfully pursue international markets in geopolitically turbulent times. Identifying their mechanisms and viewing them longitudinally shows MNEs as political actors, not just adapting and dealing with novel political contexts
but actively shaping political identities and processes of legitimization. This paper uses this case to argue for a rethink of political risk in international business, to regard it as a source of political opportunities that multinationals
can capitalize on, and not exclusively as a source of liabilities that need to be managed.