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Recent international business research finds that state-owned multinational enterprises (SOMNEs) invest relatively more in politically risky host countries than do privately-owned multinational enterprises (MNEs). This study aims to investigate theoretically and empirically whether state ownership mitigates the impact of host-country political risk on subsidiary economic risk.

The authors link theoretical arguments on state ownership to arguments from non-market strategy literature to outline mechanisms whereby state ownership can buffer subsidiaries from political risk, weakening the link between host-country political risk and earnings volatility in subsidiaries. Using a data set on Norwegian MNEs’ foreign subsidiaries across almost two decades, the authors test this prediction using both matching methods and panel regressions.

While standard panel regressions provide empirical support only for the infrastructure sector and for the highest political risk contexts, nearest-neighbour matching models – comparing only otherwise similar private- and SOMNE subsidiaries using the full sample – reveal more general support for the political risk mitigation hypothesis.

The study presents the first comprehensive analysis of whether state ownership can mitigate the effect of political risk on subsidiary economic risk.

Recent academic studies, as well as media reporting, have devoted substantial attention to the ongoing “crisis of democracy.” Democratic “backsliding” of Central and Eastern Europe – sometimes referred to as an effort to establish a new system of “illiberal democracy” – is one of the most visible symptoms of this crisis. This narrative is supported by the quantitative metrics of democratic quality, reflecting professional community views on the appropriate criteria to define and assess democracy. However, once general public views expressed in the survey item of “satisfaction with democracy” are taken into account, the picture changes markedly. This chapter analyzes quantitative metrics reflecting expert community consensus and the general public assessment of the quality of democracy in the 27 EU members over the period 2010–2019. It documents substantial divergence between the perspectives of the experts and the general public – while expert-based indexes portray Central and Eastern European backsliding as the most significant trend in the EU democratic landscape, public opinion identifies a very different set of democracy's successes and failures. As experts and the general public fail to arrive at mutually accepted criteria of democratic performance evaluation, public debate has become futile. Meaningful discussion and systemic corrections have become unlikely, creating conditions easily exploitable by the populists, eager to frame it as an example of “elite” detachment from the “ordinary people”.

This chapter falls into line with the study about the possible incentives of interventions and their impact on democratic institutions to emphasize the need to differentiate between different military interventions and their effects on democratic institutions in the target states. The chapter theoretically builds on the Selectorate Theory (Mesquita et al. 2003) and also dialogues with liberal (Hoffmann 1997) and realist perspectives (Choi 2016) on foreign policy related to the liberal world order, human rights, economic and security interests.

The purpose of this paper is to theoretically investigate the potential welfare effects of state-owned enterprises’ (SOEs) international operations.

The paper is conceptual, applying standard economics state ownership theory based on agency theory and incomplete contracts theory to different forms of SOE cross-border operations.

When private firms are risk averse or financially constrained, or when writing complete contracts and making credible commitments are not possible, state ownership can achieve objectives such as international operations supporting domestic industrial policy, addressing social objectives in another government’s territory and addressing transnational market failures. Welfare effects may, however, also depend on home-host country relationships.

This is the first application of standard economics state ownership theory to state-owned multinationals. The analysis shows that key conclusions from the state ownership literature in a domestic setting can be extended to international operations, and highlights new theoretical issues arising from SOEs going beyond their home jurisdiction to that of another government.