Multinational firms less likely to hire former politicians, new international study finds
New research from Henley suggests that foreign multinationals are generally less likely than domestic businesses to appoint former politicians to senior roles, despite facing greater challenges as newcomers in local markets.
Multinational companies are less likely to build political connections through hiring former politicians in their foreign subsidiaries than their domestic counterparts, according to new research from Henley Business School that challenges long-standing assumptions about how international firms navigate unfamiliar markets.
Published in the Multinational Business Review, the study examined data from 22,388 firms operating across 41 countries to understand when businesses choose to appoint former politicians to senior leadership, board or management positions. The research was conducted alongside colleagues from University College London, Politecnico di Milano and Warwick Business School.
Political appointments to get ahead?
Hiring former politicians in senior leadership positions is often seen as a way for companies to gain access to local networks, knowledge and legitimacy. Through the social capital developed while they served as politicians, these individuals may help firms become “insiders,” and increasing credibility and acceptance amongst key local market stakeholders. Firms that are more connected can leverage the knowledge and insight of former politicians, which may lead to experiencing reduced bureaucracy, faster approvals, and less regulatory scrutiny. However, the researchers found that multinational firms are significantly less likely to make such appointments in the host countries than domestic firms, despite the potential benefits.
The study suggests multinational firms may be deterred by the risks associated with political appointments. including reputational damage, concerns about loss of organisational autonomy, and the possibility of sensitive information being exposed. The use of connections may be linked to corruption, political tagging and party control. Multinational firms that depend on global reputational assets may prioritise protection of those assets over solving possible outsidership problems.
However, the research also found that the picture changes when multinational firms become highly dependent on a host country. Businesses were more likely to appoint former politicians when the local market was strategically important to their operations, when they operated in sectors where informal business practices were common, and when they were operating in more autocratic political systems. In these cases, the potential gains from overcoming outsidership outweigh the risks.
Increasing dependency leads to political hires
The findings led the researchers to propose a new concept, the “liability of dependency”, arguing that companies' political strategies are shaped not simply by being outsiders in a market, but by how dependent they are on local institutions, resources and government relationships.
Commenting on the findings, researcher Professor Davide Castellani, said:
Our findings suggest that hiring former politicians can help multinational companies overcome being outsiders abroad, but it also brings risks to reputation and autonomy. Managers should weigh how much their business depends on the local market. The greater the dependence, the more likely the benefits are to outweigh the risks.
The researchers believe the findings offer important lessons for multinational companies operating in increasingly complex political and regulatory environments, demonstrating that there is no one-size-fits-all approach to corporate political strategy.
To speak with Professor Davide Castellani or any of our academic experts, email pr@henley.ac.uk.
