Effect of populism on the internationalization of emerging market firms

Effect of populism on the internationalization of emerging market firms Jorge Alcaraz Department of Economics, Universidad de Monterrey, San Pedro Garza Garcia, Mexico Julio Martinez-Suarez Business School, Tecnologico de Monterrey, Monterrey, Mexico, and Miguel A. Montoya InstitutefortheFutureofEducation,TecnologicodeMonterrey,Monterrey,Mexico Abstract Purpose –This paper aims to determine whether policy uncertainty caused by institutional decay in countries with populist rulers influences the internationalization decision of emerging market firms (EMFs). Design/methodology/approach –The study used binary logit analysis on firms from Latin American countries undertaking cross-border greenfield investment projects. Findings –The results suggest that internationalization decision is demotivated by policy uncertainty generated by populist chief executives and promoted by that of political parties. Originality/value –This study uses populist rhetoric to describe policy uncertainty due to chief executives and ruling parties, which influences internationalization decision by increasing anticipated transaction costs. This inquiry identifies populism as a variable that influences EMFs to internationalize, while empirically testing the claim of theoretical scholarship that populism reconfigured the sociopolitical and institutional forces that shape the world’s business. This study further advances institutional theory by offering a fresh perspective on the influence of home instead of host-country institutions on the internationalization motivation of firms due to institutional decay caused by populist regimes. Keywords Latin America, Institutional theory, Internationalization, Multilatinas, Populism, Emerging market firms Paper type Research paper © Jorge Alcaraz, Julio Martinez-Suarez and Miguel A. Montoya. Published by Emerald Publishing Limited. This article is published under the Creative Commons Attribution (CC BY 4.0) licence. Anyone may reproduce, distribute, translate and create derivative works of this article (for both commercial and non-commercial purposes), subject to full attribution to the original publication and authors. The full terms of this licence may be seen at http://creativecommons.org/licences/by/4.0/ legalcode The authors would like to thank the guest editors, Mohamed Amal, Dinor a E. Floriani, and Juan Carlos Sosa Varela, as well as the anonymous reviewers, for their valuable feedback and constructive comments. Their appreciation also goes out to the participants at seminars organized by the Academy of International Business, the International Business Department at the University of South Carolina, and Professor Andreas Michael Hartmann, for their substantial contributions to this study. EBR 36,1 12 Received 25 January 2023 Revised 12 July 2023 Accepted 21 August 2023 European Business Review Vol. 36 No. 1, 2024 pp. 12-31 Emerald Publishing Limited 0955-534X DOI 10.1108/EBR-01-2023-0025 The current issue and full text archive of this journal is available on Emerald Insight at: https://www.emerald.com/insight/0955-534X.htm Downloaded from http://www.emerald.com/ebr/article-pdf/36/1/12/9571004/ebr-01-2023-0025.pdf by guest on 01 December 2025 Introduction The political environment entails diverse key variables that provide an in-depth understanding of the impact of the institutional environment on global strategy (Devinney and Hartwell, 2020). The political environment of home countries, which is more unstable in developing than developed economies (Bengtson et al.,2013), leads to repercussions on firm strategies (Earl and Rose, 2022). Various disciplines took this outside-in approach to analyze political issues such as populism (Casson, 2021); however, international business (IB) scholars displayed interest in political events only after the last financial crisis (2008–2009) due to increased uncertainty related to populist leaders and parties worldwide (Aguilera et al.,2019;Amore and Corina, 2021). Populism (a specific set of ideas characterized by a Manichean distinction), between good (the people) and evil (the elite;Mudde, 2004), presents important implications for political environments. The reason is that its anti-establishment ideology changes and challenges the status quo, which sets the context for a new reality that deserves more attention from the IB literature to comprehend its implications on firm strategies (Ghauri et al.,2021). This notion focuses on the effect of the institutional context of emerging markets on the internationalization decision of local firms (Losada-Ot alora and Andonova, 2022), because such markets may provide a fertile ground for the interventionism of the state in the economy. This aspect is also related to the increase of protectionist policies pervasive to integration among countries and, consequently, increased global uncertainty and costs for cross-border transactions (Ciravegna and Michailova, 2022). From a broad perspective, the populist ideology challenges the legitimacy of establishments and intermediate power structures that regulate business–state relationships, which fosters an environment of permanent political uncertainty (Devinney and Hartwell, 2020). Furthermore, as Hartwell and Devinney (2021) highlight, “the current populist moment may outlive its present protagonists and continue to influence the global business environment for decades to come.” Recent studies cited that institutional deterioration in countries ruled by populists may shape the nonmarket strategies of firms (Blake et al.,2022;Panibratov et al.,2022), affect entrepreneurial activity (Bennett et al.,2022) and influence the allocation of foreign direct investment (FDI) (Carballo Perez and Corina, 2023;de Sousa et al.,2021). Thus, the potential effect of this deterioration on the internationalization motivation of emerging market firms (EMFs) remains under-explored. This topic is not trivial, because home-country institutions can influence internalization decision due to increased government support and encouraging policies or as a consequence of poor market-based institutions and legal frameworks (Boisot and Meyer, 2008;Xu et al.,2021). Accordingly, we aim to determine if uncertainty due to institutional decay in countries with populist rulers can influence the internationalization decision of EMFs. Our theoretical framework is anchored on institutional economics with a focus on transaction costs (Dorobantu et al., 2017). We empirically test the influence of institutional decay in countries with populist rulers on the internationalization decision of firms. We build on recent work that uses populist rhetoric to describe how chief executives and ruling parties create policy uncertainty (Bennett et al.,2022;Carballo Perez and Corina, 2023), which influences the decision of the latter to internationalize by increasing anticipated transaction costs faced by EMFs. We performed binary logit analysis on 1,108 EMFs from 13 Latin American countries (henceforth, Multilatinas) across 15 years (2004–2018). These Multilatinas conducted 2,492 cross-border greenfield projects across 94 destination countries. The main results suggest that the internationalization decision of Multilatinas is Effect of populism 13 Downloaded from http://www.emerald.com/ebr/article-pdf/36/1/12/9571004/ebr-01-2023-0025.pdf by guest on 01 December 2025 demotivated by the populist rhetoric of chief executives and promoted by the populist rhetoric of political parties. We contribute to the literature by identifying populism as a variable that encourages Multilatinas to internationalize due to policy uncertainty as a result of the institutional decline of the home country. We also empirically test the claim of theoretical scholarship that populism reconfigured the sociopolitical and institutional forces that shape global business (Blake et al.,2022;Devinney and Hartwell, 2020;Hartwell and Devinney, 2021). We advance institutional theory by demonstrating that the internationalization decision of domestic firms is partially influenced by changes in the rules of the game (North, 1990), which occur under populist regimes. Lastly, the study serves as a guide for scholars and practitioners in illustrating the effect of political environments, in specific populism, on the global strategy decisions of firms (Casson, 2021). Literature review and hypothesis Domestic institutions and internationalization The institutional economics perspective (North, 1990) completes transaction cost and internalization theories that explain the factors motivating firms to internationalize (Peng et al., 2008). This approach is relevant, because institutions can shape firm strategies, and such capacity is increasingly evident in emerging economies (Wright et al.,2005). We focus on formal institutions, such as those referring to codified laws (e.g. property rights and contract enforcement), central to setting the parameters required to guide all actors in countless transactions within a given society (Kim and Aguilera, 2016). In this regard, domestic institutions constitute features that determine the international strategies of local firms (Tallman and Pedersen, 2015). Former empirical evidence suggests that the institutional environment in emerging countries influences the internationalization decision of domestic firms (Cuervo-Cazurra, 2008). This notion holds for the Chinese overseas investment scale, which is influenced by domestic institutional hardship (regulatory restriction, bureaucracy, local protectionism, informal payment, bribery and corruption and nontransparent and inadequate policies and services) (Luo and Wang, 2012). In addition, for Chinese firms, institutional fragility (business–government interfaces, development of private firms, development of product markets, development of facto markets and development of market and legal intermediaries) pushes their internationalization decision (Shi et al.,2017). This behavior remains the same when home governments implement discriminatory policies that favor state-owned enterprises (Wei et al., 2015) from specific industries (Enderwick, 2017). Deng and Zhang (2018) identified that low institutional quality in China promotes the decisions of smalland medium-sized enterprises to internationalize. From the historical perspective, Barnard and Luiz (2018) in South Africa propose that the internationalization decision of local firms is due to increased misalignment and societal contestation (institutional deterioration and contained contestation, periods of societal instability and/or inadequate institutional reforms and pervasive societal instability and/or fundamental changes in institutions); authors use measures for institutional rights (property and political rights) and social stability. Stoian and Mohr (2016) analyzed 29 emerging countries in Europe, Latin America, Asia, Africa and the Middle East from 1995 to 2011 and suggested that regulative voids (protectionism and corruption) influence outward FDI (OFDI). In Latin America, Aguilera et al. (2017) analyzed unique features to better understand the influence of the home country on firm behavior and their internationalization. The study concludes that the idiosyncrasies of domestic markets, such as suboptimal regulation or EBR 36,1 14 Downloaded from http://www.emerald.com/ebr/article-pdf/36/1/12/9571004/ebr-01-2023-0025.pdf by guest on 01 December 2025 protectionism through tariff and subsidy, potentially encourage the international diversification of firms. Similarly, Finchelstein (2017) examined the influence of state actions, such as subsidies and regulatory support, on the internationalization process of large firms in Argentina, Brazil and Chile. The findings demonstrate that “different sets of public policies have consequences on the sectorial diversification, pace, and number of large internationalized firms.”In a recent study, Alcaraz et al. (2023) identified that Latin American firms’internationalization decisions are influenced by the weak institutional conditions in their home country. Populism is a political force that reshapes the institutional frameworks of countries and influences the internationalization motivation of firms by imposing policies (macro and micro) to attain redistribution. This scenario occurs in populist regimes in Latin America (Edwards, 2019) or in the promotion of protectionist and isolationist populist policies, as in Central and Eastern Europe (van der Waal and de Koster, 2017). The current study focuses on this thus-far-missed relationship. Populism and institutional environment In the political science literature, three approaches are considered the most influential in examining the populist phenomenon (Rovira Kaltwasser et al.,2017), namely, political– strategic (Weyland, 2001), sociocultural (Ostiguy, 2009) and ideational (Mudde and RoviraKaltwasser, 2018). This study adopts the ideational approach, which recently attracted scholarly attention. It defines populism as a thin ideology characterized by a Manichean struggle between good (i.e. the people) and evil (i.e. the elite), which privileges the general will of the people. To determine how populism alters an institutional environment, identifying the specific features of the populist phenomenon that potentially influences the set of laws, regulations, administrative procedures and policies formally sanctioned by the government is necessary. We posit that deinstitutionalization and short-term policy bias (Blake et al., 2022) promote an environment of political uncertainty in populist regimes. Deinstitutionalization is a process through which populists steadily undermine the institutional safeguards and procedures of modern democratic governance. By claiming that democratic institutions are unnecessary intermediaries that serve evil elites in their ascendance to power (Hawkins, 2009), populists openly engage in the erosion of established political channels. Thus, they can implement other tools of direct democracy (Barr, 2009)to fulfill the will of the people. Therefore, government decisions may not be taken and enforced in accordance with traditional rules and regulations. Instead, alternative institutional channels may be used, such as plebiscites and referenda, which the populist regime considers legitimate. Regarding short-term policy bias, populists may adopt policies that deliver immediate benefits, which are outweighed by much larger costs in the long run (Edwards, 2019). Populist incumbents magnify: [...] short-term policy bias by (a) shortening the temporal gap between policy adoption and the perception of benefits received by the populist’s supporters and (b) further increasing the size of future policy costs, i.e., lowering the net present value of a given policy’s economic impact (Blake et al., 2022, p. 6). In summary, populism deinstitutionalization and short-term policy bias critically exacerbate political uncertainty due to an unclear indication that institutions will continue to support market exchange and protect business and private property rights, which leads to an anticipated increase in transaction costs. Effect of populism 15 Downloaded from http://www.emerald.com/ebr/article-pdf/36/1/12/9571004/ebr-01-2023-0025.pdf by guest on 01 December 2025 Effect of populism on firms’internationalization Institutions provide the context for the arena in which firms play. We state that populism is a part of this context given its broad implications to countries that adopt this stream. Populists represent a source of political uncertainty, which “disrupt(s) a country’s political and economic institutions by challenging, weakening, undermining, or eliminating preexisting rules of the game previously set by the ruling elite”(Carballo Perez and Corina, 2023, p. 4). Therefore, institutional decay in countries ruled by populists offers a key landscape for analyzing the effect of the former on the internationalization decision of Multilatinas. This view is related to the pivotal role of home-country institutions in the internationalization of firms (Aguilera et al.,2017;Peng et al.,2008). To examine the influence of institutional decay and resultant policy uncertainty on the internationalization decision of Multilatinas, we use the populist rhetoric of leaders and ruling parties to describe the creation of policy uncertainty by political actors (Bennett et al.,2022; Carballo Perez and Corina, 2023). These types of rhetoric are deeply interlinked, which may render differentiating the effects on the internationalization of firms difficult. A sensible approach for analyzing the rhetoric of populist leaders and political parties is to conduct the analysis separately to better visualize if such actors influence the internationalization motivation of firms. Contemporary populism belongs to strong political actors that occasionally receive direct mandates from the people to govern, as expressed by voting results. The pressure is high because political leaders, at least at the beginning of their presidential period, frequently hold high shares of supporters. For example, populist leaders in Latin America won the presidency with more than 50% of the total votes from 2003 to 2018 (Grzymala-Busse and McFaul, 2020). Thus, expecting that the populist rhetoric of leaders reflects their intention to undertake immediate actions to fulfill the will of the people is favorable. For example, the “democratic and cultural revolution”proclaimed by Evo Morales changed Bolivia’s constitution and directly threatened the old business elites by promising to redistribute land to the poor (Wolff, 2016). Ecuador’s Rafael Correa, alternatively, declared himself as the leader of a citizen’s revolution that would reshape the country’s institutional architecture by pursuing an anticorporatist agenda that cut the channels of communication with business associations (Goeury, 2021). Early in his presidency, Andr es Manuel L opez Obrador fulfilled his campaign promise of canceling the construction of Mexico City’snew international airport due to its alleged harm to the environment and corruption practices. As such, he sent investors the message that previous long-term commitments between past administrations and private firms may no longer be honored (Panibratov et al.,2022). The populist rhetoric of leaders in developed economies also signals a potential increase in policy uncertainty. For instance, Donald Trump’s statements in support of a closed and aggressive trade policy for protecting domestic firmsandjobsintheUSledtotherenegotiationoftheNorth America Free Trade Agreement (NAFTA, currently the United States-Mexico-Canada Agreement). He claimed that other countries took advantage of the US through “unfair”trade deals (Lester and Manak, 2018). NAFTA’s renegotiation created a climate of uncertainty for firms in the trading bloc, because Trump’s view was based on restrictive rules of origin for reducing the number of tariff-free usable materials, which resulted in higher tariff for inputs or final goods. Thus, the rhetoric of populist leaders encourages private firms to engage in internationalization due to the threat posed to the established institutional structure and related costs. Thus, the study presents the following hypotheses (Figure 1): H1. The populist rhetoric of political leaders from the home countries of Multilatinas is likely to promote their internationalization decision. EBR 36,1 16 Downloaded from http://www.emerald.com/ebr/article-pdf/36/1/12/9571004/ebr-01-2023-0025.pdf by guest on 01 December 2025 Although presidential systems grant the executive with power to control other institutions (legislature and judiciary; (P erez-Liñ an et al.,2019)), highlighting the relevance of political parties to political systems is necessary. Political parties possess longer-term goals than do politicians (Levitsky, 2018), and the capacity of presidents to influence law and policy formulation depends on the relationship between their constitutional and partisan powers (Mainwaring and Shugar, 2002). Populist parties, such as leaders, are political outsiders prone to adopt radical positions related to policymaking due to their interpretation of politics through the good-versus-evil lens of morality. de Sousa et al. (2021, p. 7) state that, “[...] they may also pursue illconceived, kneejerk and sound-bite solutions to complex problems, without taking into consideration the financial sustainability and externalities of their decisions.”In addition, the policymaking of populist parties presents procedural features that constitute new challenges for business. For example, policymaking in nonpopulist democracies is heavily influenced by area-specific technocrats, whose expertise provides firms with a view of the potential effects of a given policy on economic and sociopolitical environments. Conversely and by definition, populist policymaking is against expert positions, because it is responsive to the majoritarian preferences of the people (Caiani and Graziano, 2022). For example, when asked which economists supported Brexit, UK cabinet minister Michael Gove responded that “people in this country have had enough of experts”(Mance, 2016). Similarly, Mario Delgado, leader of the National Regeneration Movement (Morena), lashed out at a political opposition who criticized the revocation of mandate consultation by twitting “Conservatives are terrified that the most important decisions in the country are no longer made by an elite, but by the people of Mexico”(Newsroom, 2022). Consequently, the populist rhetoric of parties could signal an inclination to fulfill the will of the people by circumventing established institutional channels, while unconditionally passing laws, programs, projects and budget allocations in the senate or congress. This tendency translates into immediate benefits for constituencies, which ignores the potential long-term adverse effects, such as the loss of foreign human capital, shortfall in budget, inflation and currency devaluation, of such initiatives on macroeconomic and sociopolitical stability. Therefore, we present the following hypothesis: H2. The populist rhetoric of the political party over which a political leader presides is likely to promote the internationalization decision of Multilatinas. Methodology and data The study used various datasets to rigorously test the hypotheses and evaluate the influence of the populist discourse of presidents and the populism of political parties on the internationalization decision of firms. We obtained the sample from fDi Markets, a database developed by the Financial Times group, which tracks and records greenfield projects from Figure 1. Conceptual model Populist rhetoric of political leaders Populist rhetoric of political parties Internationalization decision H1(+) H2(+) Source: Own elaboration Effect of populism 17 Downloaded from http://www.emerald.com/ebr/article-pdf/36/1/12/9571004/ebr-01-2023-0025.pdf by guest on 01 December 2025 2003 to date. It also registers project date, firm name, source and destination countries, industry, capital invested (Capex) and jobs created. This database excludes the financial identifiers of companies (e.g. Ticker and PermID). It is a limitation to the retrieval of firmlevel information in studies that use many firms from diverse countries (Loncan, 2021). Nevertheless, it is not a constraint, as demonstrated by scholars (Duanmu, 2014;Wu et al., 2022). The sample is integrated by 1,108 parent companies from 13 countries in Latin America. These firms performed 2,492 greenfield projects from 2004 to 2018 across 94 destination countries. Appendix provides a list of the countries. Given the data limitations, atypical data from the pandemic, and potential biases to the results, we considered 2018 as the last year of study. We focused on Latin America, because support for populist mobilizations regained unparalleled traction over the past two decades, and leaders considered to be at least somewhat populist rule a number of the largest economies in the region (Lewis et al., 2019). The study used greenfield investment projects as the unit of analysis. Firms from emerging markets frequently undertake high-risk and high-control investment entry modes, such as greenfield investments, to expand operations abroad (Luo and Tung, 2007). Thus, increased attention is required for studies on greenfield investment (Jiang et al., 2021)to unveil the internationalization strategies of EMFs. Dependent variable Following Luo et al. (2019) and Yang (2018), the dependent variable is dichotomous and is coded 1 if a firm decides to internationalize, and 0 otherwise. This dummy variable captures the internationalization decision of firms as influenced by the populist discourse of presidents and the populism of ruling political parties from the firms’home country. Independent variable The key independent variables cover the populist discourse of presidents and the populism of political parties. To measure the first, we utilized the Global Populism Database (GPD), which is part of the New Populism Project (affiliated with the Guardian Media Group). The second and most recent version of the data set covers 241 chief executives from 74 countries and includes 324 government terms and 1,240 speeches between 2000 and 2022 (Hawkins et al., 2019). GPD measures the level of populist discourse from political leaders (presidents and prime ministers) through textual analyses of speeches, coded as 0 (uses few if any populist elements), 1 (uses strong populist elements but also non-populist elements) and 2 (includes extremely populist elements). GPD calculates the final scores for political leaders during their term as the average of speeches delivered throughout their tenure. We used the method of Hawkins (2009) to measure populism as the discourse of political leaders, which is consistent with recent studies such as Bennett et al. (2022) and Carballo Perez and Corina (2023). Measuring political discourse is an appropriate approach given the strong connection between populism and leaders governing populist movements (Rode and Revuelta, 2015). Focusing on the chief political executive, the study intends to effectively capture the essence of populism and its association with the actions and rhetoric of leaders. Regarding the populism of political parties, we use the Global Party Survey, a research project based at Harvard University and published in 2020. Experts (1,861 scholars of parties and elections) from 163 countries answered the questionnaire, which comprises 21 core items rated using a 0–10-point continuous scale that estimates the ideological values, issue positions and populist rhetoric of 1,043 political parties. We used item 8, which is the central measure for populist rhetoric (Norris, 2020a, p. 10). It states: EBR 36,1 18 Downloaded from http://www.emerald.com/ebr/article-pdf/36/1/12/9571004/ebr-01-2023-0025.pdf by guest on 01 December 2025 Parties can also be classified by their current use of POPULIST OR PLURALIST rhetoric. POPULIST language typically challenges the legitimacy of established political institutions and emphasizes that the will of the people should prevail. By contrast, PLURALIST rhetoric rejects these ideas, believing that elected leaders should govern, constrained by minority rights, bargaining, and compromise, as well as checks and balances on executive power. Where would you place each party on the following scale? 0 Strongly favors pluralist rhetoric...10 Strongly favors populist rhetoric. The measure of populist rhetoric is recognized as a reliable and valid indicator of the populism position and ideological values of political parties (Norris, 2020b). Recent studies employed this approach to investigate populism in various contexts (de Jong et al.,2022;de Reguero and Jakobson, 2023), which further supports its applicability and significance in contemporary research. We aim to explore the impact of populism on the investment decisions of Multilatinas and focus on the influence of political leaders and their political parties. Thus, we introduce a variable that measures the level of populism attributed to political leaders, which enables the assessment of its effect on internationalization decision. Additionally, we incorporate a variable for evaluating the further influence of populism associated with the political party led by the president on internationalization decision. This research intends to shed light on the complex relationship between populism and corporate decision-making in Latin America. Control variables Given the nature of the data set, we control for the home country conditions of firms and the environments of host countries. In terms of home-country variables, we measure institutional conditions using the World Governance Indicator (WGI) of the World Bank (WB) (Kaufmann et al.,2010). Given the multidimensionality of institutional conditions (Shi et al., 2017) we use an aggregated variable established using a simple average of the six dimensions (Fon et al., 2021) of the WGI. This process is correct, because the dimensions present high correlations among themselves (Slangen and Beugelsdijk, 2010). Following Cuervo-Cazurra and Genc (2008),wemodified the original scale (2.5 to 2.5) by adding 2.5 to each grade to obtain a scale ranging from 0 to 5, which eases interpretation. Gross national income (GNI) enables the measurement of the economic performance of home countries (Shi et al.,2017); the larger the economic performance, the more the chances that firms from these countries obtain the required resources for internationalization. We measure infrastructure using the number of fixed-line and mobile telephones per 100 inhabitants using data from the WB (Cuervo-Cazurra and Genc, 2008). Firms from emerging economies operate under poor infrastructure conditions, which undermines and potentially hinders performance. Host-county conditions also influence internationalization decision; thus, we include variables to control for this aspect. We control for trade openness in host countries, which could be considered part of pro-market reforms and could reduce transaction costs, provide better governance conditions and favor market performance, which can motivate the internationalization of firms from emerging countries (Borda Reyes et al.,2019). We use trade freedom of the Heritage Foundation to measure trade openness, which estimates freedom in trade policy (absence of tariff and non-tariff barriers affecting foreign trade of goods and services). We measure FDI openness using the investment freedom of the Heritage Foundation (Cuervo-Cazurra, 2006), whose rationale is similar to that for trade openness. This variable identifies FDI freedom and capital flow; firms can move resources without restriction in countries without constraints on FDI. Host-country economic Effect of populism 19 Downloaded from http://www.emerald.com/ebr/article-pdf/36/1/12/9571004/ebr-01-2023-0025.pdf by guest on 01 December 2025 development, which indicates economy size, is an appealing factor for firms (Buckley et al., 2007). We measured it using the GNI of the countries; data were retrieved from the WB. We also control for variables that capture differences between home and host countries that influence the internationalization decision of firms such as common colony, common language and distance (Alcaraz et al.,2020). We use a dummy variable to measure if two countries share colonial ties (coded as 1, and 0 otherwise). Common language is a dummy variable that measures whether people from two countries share the same language (coded as 1, and 0 otherwise). The fact that individuals from two countries share the same language decreases transaction costs and facilitates IB activities. Distance (in kilometers) denotes the geographical distance between two countries; the larger the distance, the lower the chances of cross-national business operations. We obtained data for these variables from Centre d’ Etudes Prospectives et d’Informations Internationales, a French research center dedicated to international economics. Additionally, we control for firm-level variables because they can influence internationalization decision. First, we control for the internationalization experience of firms. Based on the availability of the dataset, we build a proxy variable using the cumulated number of projects by a firm (Wu et al., 2022). Second, we control for firm-owned resources by building a dummy variable (Loncan, 2021) using the median of Capex on projects (Duanmu, 2014); largeand small-scale projects take values of 1 and 0, respectively. Third, using the two-digit industry codes of the North American Industry Classification System, we control for firm industry (Dau et al., 2020) given that the internationalization decision of firms could vary across industries (Luo et al.,2019). Statistical methods Given the dependent variable nature in the panel data set, we use a binary logit model as the estimation method to test the hypotheses. The previous literature indicates that logistic models are helpful for estimating the probability of the international investment decisions of firms (Kong et al.,2020;Saikia et al.,2020;Valentino et al.,2019). This probability considers diverse conditions, such as firm, home and host-country features (Clegg et al.,2018), and bilateral variables that reflect differences between source and destination countries (Thede and Karpaty, 2023). The logit model uses the maximum likelihood method for estimation, which avoids the assumption of multivariate normality and equal covariance matrixes (Fischer, 1973;Trueck and Rachev, 2009). To adequately capture variability in the yearly observations of firms and shifts over time, we use random effects in the analysis to control for the characteristics of unobserved firms (Cuervo-Cazurra and Dau, 2009). To avoid heteroskedasticity, we use robust standard errors (Belderbos et al.,2020;Yang, 2018) clustered on parent companies (instead of investing companies) that perform greenfield investment projects. Furthermore, we lag by one-year time-varying explanatory variables, which is a broadly accepted practice, to control and mitigate potential issues related to endogeneity (Alcaraz and Salamanca, 2018;Clegg et al.,2018;Mazouz et al., 2021;Saikia et al.,2020). We present the logit regression model as follows: Pr OFDIijt ¼1jX  ¼ b 0þ b 1PopPolLeadjt1þ b 2PopPolParjt1þ d Xþ « ijt where irefers to the firm of interest, jdenotes home country and trepresents the time of occurrence of OFDI, that is, firm decision to perform a greenfield international investment project. PopPolLead jt1 denotes the populist discourse of political leaders, and PopPolPar jt1 represents the populism of political parties; both are derived from the home countries of firms. 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List of countries Home countries: Argentina, Brazil, Chile, Colombia, Costa Rica, Ecuador, El Salvador, Guatemala, Mexico, Nicaragua, Panama, Paraguay, Uruguay Host country: Algeria, Angola, Argentina, Australia, Austria, Bangladesh, Belgium, Belize, Bolivia, Brazil, Cambodia, Canada, Chile, China, Colombia, Costa Rica, Croatia, Czech Republic, Denmark, Dominican Republic, Ecuador, Egypt, El Salvador, Ethiopia, Finland, France, Germany, Ghana, Greece, Guatemala, Guinea, Guyana, Haiti, Honduras, Hungary, India, Indonesia, Iran, Ireland, Israel, Italy, Jamaica, Japan, Jordan, Kazakhstan, Kenya, Latvia, Lebanon, Libya, Luxembourg, Malawi, Malaysia, Malta, Mexico, Moldova, Morocco, Mozambique, The Netherlands, New Zealand, Nicaragua, Nigeria, Norway, Oman, Pakistan, Panama, Paraguay, Peru, Philippines, Poland, Portugal, Qatar, Romania, Russia, Rwanda, Saudi Arabia, Singapore, Slovakia, South Africa, South Korea, Spain, Sri Lanka, Sweden, Switzerland, Tanzania, Thailand, Trinidad and Tobago, Turkey, UAE, Ukraine, United Kingdom, USA, Uruguay, Vietnam, Zambia Source: Own elaboration Effect of populism 31 Downloaded from http://www.emerald.com/ebr/article-pdf/36/1/12/9571004/ebr-01-2023-0025.pdf by guest on 01 December 2025