Dr. Ruth V. Aguilera
Darla and Frederick Brodsky Trustee Professor in Global Business
Distinguished Professor, International Business and Strategy
D’Amore-McKim School of Business, Northeastern University
The Liabilities of Foreign Institutional Ownership:
Evidence from Corporate Political Spending by U.S. Firms
Abstract: The benefits of foreign institutional ownership have been amply researched, but there are also potential downsides to such ownership. High foreign institutional ownership can subject a firm to heightened regulatory scrutiny and compliance, increasing its political dependence. Drawing on resource dependence theory, we argue that firms can manage the political dependence that arises from foreign ownership by engaging in corporate political spending (CPS). We derive two moderating conditions from our theoretical argument, positing that the influence of foreign institutional ownership on CPS hinges on the intensity of a firm’s government contracting and on the political sensitivity of the industry. Using a sample of publicly-traded U.S. firms, we find empirical support for our arguments. Our study advances strategic ownership research by showing that U.S. firms can address potential liabilities associated with foreign institutional ownership through nonmarket strategy.
Junfeng Wu , 972-883-5053
Questions? Email me.