By Authors: Jin Hyung Kim (George Washington University); Jordan I. Siegel (University of Michigan)
Interviewers: Grace Headinger (London Business School); Aria Huang (Saïd Business School, University of Oxford)
Article link: https://doi.org/10.1177/00018392231217676
Could you please take us through the order of operations in which you discovered and explored the novel quantitative dataset for this paper, engaged in qualitative fieldwork, and ultimately assembled the findings. How did you generate the research question and hypotheses, and when and how did you decide on pursuing an integrated, mixed-methods approach to investigating the question?
Most of all, we appreciate your interest in our paper and this opportunity to talk more about our paper!
By way of background, Jordan has been doing research related to institutional and nonmarket strategy for over 26 years now, and before that he had a background in studying political science. Jin Hyung developed his dissertation under the guidance of Jordan, as dissertation advisor, when Jin Hyung was in the doctoral program at Harvard Business School. Both Jin Hyung and Jordan are interested in nonmarket strategy in the global business context, and as a part of his doctoral dissertation, Jin Hyung collected various nonmarket strategy data and built his own dataset particularly focusing on foreign multinational enterprises (MNEs) in the United States. Although lobbying data was explored by many scholars across different disciplines and a vague idea of existence of fee differential across companies was floated, no one examined why some firms pay more than others. So, Jordan suggested an idea of how we can examine this fee differential.
“The present research idea became feasible after Jin Hyung joined GWU as a faculty member in 2017. At that point, as we all know, interstate tension became more intensified between countries, and particularly we witnessed that this was more serious between democratic (such as the United States) and autocratic countries.”
The present research idea became feasible after Jin Hyung joined GWU as a faculty member in 2017. At that point, as we all know, interstate tension became more intensified between countries, and particularly we witnessed that this was more serious between democratic (such as the United States) and autocratic countries. Furthermore, due to projects for both, Jordan and Jin Hyung periodically met in DC and conducted interviews with lobbyists, and we learned that companies from autocratic countries are penalized and suffer from legitimacy issues. This made us test the fundamental research question in this paper.
Along the way, we were also grateful for all the constructive feedback from the review team, through which we were able to strengthen our theory. In particular, while we were already committed to fieldwork-informed research as a key focus, the reviewers gave us further encouragement to put an emphasis on our fieldwork learnings.
Your central theoretical contribution is the idea that legitimacy costs – and thus the liability of foreignness – can stem from values-based ideological conflict rather than just information asymmetry or lack of embeddedness. How should scholars think about this mechanism in relation to existing theories of legitimacy – for instance, Suchman 1995’s different types of legitimacy: cognitive, moral, and pragmatic legitimacy? Do you see it as complementary or as a shift in how we conceptualize foreignness?
The liability of foreignness is one of the fundamental concepts in the international business and global strategy literature as you are aware. There has been discussion about how much of the liability of foreignness comes from lack of information, lack of network embeddedness, discrimination, etc. And there has been discussion about the extent to which the liability of foreignness might go away in the short term or long term versus never.
We tend to believe that the liability of foreignness is impacted by a more fundamental perception of legitimacy attached to the foreign MNE in the eyes of host-country stakeholders. This has two very important theoretical implications. First, as you noted in your question, how people perceive different political regime (i.e., values-based ideology in politics) is more or less, we think, moral- and cognitive-legitimacy in Suchman’s (1995) legitimacy classification. People see and evaluate the difference, and this becomes the normative value evaluation in assessing the foreign MNE. It’s not about who they really are but about how they are perceived, which leads to whether they are legitimate or not. Even if the companies have nothing to do with their governments, even if they are not supporters of autocracy, and even if they have enough experience and capability in the host country, they will be often evaluated and assessed by the host-country stakeholders, positively or negatively.
“Even if the companies have nothing to do with their governments, even if they are not supporters of autocracy, and even if they have enough experience and capability in the host country, they will be often evaluated and assessed by the host-country stakeholders, positively or negatively.”
In summary, the most important theoretical contribution we have made in the paper is that we have identified one additional source of the liability of foreignness. We don’t think our theory and empirical results suggest a shift in how we conceptualize foreignness as you asked. Rather, we believe that, having integrated previously underexplored theoretical concepts, our new theory complements what the literature has previously known and theorized about the liability of foreignness.
What initially sparked your interest in ideology versus other potential confounding variables in the divide between global democracies and autocracies? For instance, value-based ideologies often coincide with a whole host of other country characteristics, and you address many of them, such as tax haven status, cultural distance, shared historical, cultural, and values ties, and the tone of media-reported events regarding bilateral relations via GDELT. How did you select the confounding variables that you tested in the robustness checks?
As you noted, we have a demonstrated commitment to fieldwork-informed research. The many lobbyists that we interviewed so often spoke unprompted of home-market autocracy as being a central variable for them in their labor market. From there we looked to test the logic of how this variable would likely have detectable patterns in prices in this market for lobbying services. And then from there we tested whether those patterns exist. And yes, part of that exercise was about running a battery of robustness checks for alternative explanations and seeking to test the effects of unobserved heterogeneity. Also, as we went through the review process, the reviewers provided constructive feedback which helped inform a series of yet further robustness checks. With all these together, we attempted to test for other known factors that could have potentially driven our outcome variable.
How do you approach moving from a locally grounded observation to a contribution that speaks to broader theoretical conversations, rather than remaining context-specific?
We see it as a type of constant back-and-forth conversation between the high-level theory-driven literature about what causes the liability of foreignness, on the one hand, and the phenomenon of non-U.S. companies from all over the world coming to Washington, D.C., to pursue their company objectives with the help of lobbyists. We sought to make contributions to both the theory-driven literature as well as to an increased understanding of how the empirical context works. In that sense, it’s not about moving from a locally grounded observation to a contribution that speakers to broader theoretical conversation as much as it is a preexisting, constant conversation between theory and phenomenon. And to abstract a bit from the particular context, we think that the type of research that we aim to do is often about engaging equally with the prior theory and its debates and its gaps, on the one hand, and with the phenomenon of interest that potentially could help to fill in a gap or shed light on a debate in the prior theory-driven literature. In summary, we don’t think one aspect is more important than the other or should drive the other. We think that both theory and phenomenon should be equally considered and inform us of how we can improve our theoretical knowledge as well as better understand our observations.
“We think that both theory and phenomenon should be equally considered and inform us of how we can improve our theoretical knowledge as well as better understand our observations.”
One dimension that isn’t explicitly addressed is whether the estimated effect is driven disproportionately by a small number of high-salience autocratic countries during the 1998-2012 window. Did you consider a leave-one-out analysis to test whether the coefficient is stable across autocratic home countries or whether it may be concentrated in a few specific cases?
We indeed tested and presented this during the review process. As a side note, in the second round, we had 162 pages including main manuscript, appendix, and response to reviewers! Those analyses were robustly consistent and still strongly supportive of our findings.
Fieldwork often generates multiple interesting observations and potential directions. Could you share a particularly memorable moment from your fieldwork that revealed something unexpected or reshaped how you thought about the phenomenon? When you encounter several plausible insights, how do you decide which one to develop into a central theoretical contribution for publication?
There were many interviews that we found enlightening and in that sense memorable. Take the first quote from our article. We were kind of aware of how Congress had sharply reduced funding in the 1990s for staff-based expertise for legislators and that this contributed to the reliance of congressional offices on lobbyists to help them understand a technical issue and to help them with legislation, but that lobbyist started talking about this phenomenon on their own and made it sharply vivid in terms of how things work in their job. They pointed out the high degree of reliance of the congressional office on the lobbyist in such a pointed and memorable way. And then take the second quote from our article. We had an inkling that there was often a price premium for non-U.S. companies wanting to hire a lobbyist in Washington, D.C., but this lobbyist started talking on their own about how they act differently in a price negotiation the minute that they find out the client is from an autocratic country. When they started to talk about asking to double the price for such a client, it may not have been surprising per se, but it certainly opened our eyes to the potential magnitude of what was going on in this market.
Looking back on our experience, we saw one major theme coming out of our interviews, which was about the liability of foreignness for the foreign companies hiring lobbyists in Washington, D.C. Core to that theme was the situation of companies that came from autocratic countries. Other themes, which were brought up less but certainly also at other times, such as the nature of the transaction, were ones that we were able to include as control variables in our study. Those were worthwhile control variables to include, but they didn’t seem like candidates for a central theoretical contribution. If we had had a different situation, such as one with multiple potential candidates for central theoretical contributions, we think that would have made for a very different paper. One good example is another co-authored paper about the phenomenon of Paul Manafort that has been published recently in Organization Science.
In the introduction and discussion, you explicitly state that your findings do not endorse price differentiation based on identity characteristics, such as autocracy/democracy distinctions, particularly since a country’s political system may not represent their people and there is an overall more nuanced power picture behind this binary dichotomy. From our experience, these sorts of disclaimers are rather rare in published empirical work in management research. What led you to explicitly include this in the body of your article?
This is a great catch! This was not included in the first version of the manuscript but came up as we went through the review process. One of the reviewers expressed the view essentially (by our interpretation) that it would be a pity if the results were used by others to in any way allow for discrimination against those from autocratic countries. As we are empirical scholars, we think it is important to include this statement such that our empirical findings would not be misinterpreted in that way.
Your paper bridges organization theory, international business, and political science. What advice would you give to PhD students who want to pursue similarly interdisciplinary work while still making a clear theoretical contribution to management journals like ASQ?
We believe that broad knowledge of theories and interests in social phenomena should go hand in hand. Both of us are quite interdisciplinary in many aspects. Jordan studied political science in undergrad, and Jin Hyung studied international relations and economics for his masters. And both of us studied strategy and international business for our doctorate. This allowed us to not only seek knowledge on strategy and international business but also to connect our knowledge to different theories from other social science fields.
Our main advice is to read widely. There is so much that we can learn from our neighboring social science fields. And hopefully there is new knowledge in management to be gained from drawing intellectual connections across these social science fields.
Interviewer Bios:
Grace Headinger is a PhD candidate in Strategy and Entrepreneurship at London Business School. Her research focuses on how ownership influences organizational performance and social impact, with a specific focus on family offices and foundations. She is particularly interested in using a mixed-methods approach to theorize how founders and entrepreneurial families engage in direct investments, philanthropy, and political engagement.
Aria Huang is a PhD candidate in Management at Saïd Business School, University of Oxford. Her research lies at the intersection of organization theory, cultural sociology, and strategic management. She examines how artificial intelligence (AI) is transforming evaluation and reshaping the basis of value in markets, and the implications for firm strategy and broader social outcomes.
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