The Impact of Political Risk on FDI Exit Decisions

Do political risks drive exit decisions by multinational companies (MNC)? What mechanisms can protect a multinational subsidiary in a host country that is characterized by weak institutions and high political risks? Using multinational plant-level data for Russia in the period 2000-2016 and applying the Cox proportional hazard model, we find significant effects from elevated host-country political risk when we compare the year of entry to the year of exit. MNCs are particularly sensitive to problems associated with law, order, and social conditions in Russia and the presence of the military in politics in the home country. Institutional similarity does not reduce the hazard of exits, and MNCs from high-risk countries exit less when home-country risk increases. Subsidiaries from countries that have imposed sanctions on Russia are less likely to exit, though sanctions interact with host-country risks, making them more severe. Being large and being part of a greenfield project help subsidiaries to build resistance against host-country political risks. These findings provide empirical evidence that support our conclusions regarding foreign direct investment volatility in countries with high risk

The Impact of Political Risk on FDI Exit Decisions

Do political risks drive exit decisions by multinational companies (MNC)? What mechanisms can protect a multinational subsidiary in a host country that is characterized by weak institutions and high political risks? Using multinational plant-level data for Russia in the period 2000-2016 and applying the Cox proportional hazard model, we find significant effects from elevated host-country political risk when we compare the year of entry to the year of exit. MNCs are particularly sensitive to problems associated with law, order, and social conditions in Russia and the presence of the military in politics in the home country. Institutional similarity does not reduce the hazard of exits, and MNCs from high-risk countries exit less when home-country risk increases. Subsidiaries from countries that have imposed sanctions on Russia are less likely to exit, though sanctions interact with host-country risks, making them more severe. Being large and being part of a greenfield project help subsidiaries to build resistance against host-country political risks. These findings provide empirical evidence that support our conclusions regarding foreign direct investment volatility in countries with high risk

Russia's defense industry at the turn of the century

'After more than ten years of reorganization and tentative conversion of the Russian defense industry, no end is in sight. Efforts to restructure have been muddled and a permanent, stable configuration has not been achieved. The defense industry has been marginalized politically and has failed to either take an the role of an engine of economic recovery and growth or raise the technological level of the civilian industry as many post-Soviet governments had expected. In the late 1990s, however, interest in Russian defense economics was renewed as a result of the financial crisis of 1998, the relative recovery and changes in defense policy in reaction to NATO action in Southeast Europe, the start of the second Chechen war, and the inauguration of a new administration. What effect did the general macroeconomic environment and defense policy concepts have an the defense industry? How viable was the defense complex itself as an institution, in terms of its boundaries, configuration and mission? What kind of a defense industry did the Russian political elite want? Did a shift 'from guns to butter' materialize? Which sectors became especially vulnerable to defense cuts and the shocks of macroeconomic transition? What economic impact did the active Part of the defense industry have? Will crises reverse conversion trends of the 1990s? How did companies which resisted decline achieve output growth? Were regions able to develop competency in carrying out conversion policies? These are the questions which the present study attempts to answer. Structural adjustment within the defense industry remains the most sensitive issue. Two of the main conclusions of this present study are that there is no sound rationale for the existence of a 'defense complex' and that the government must choose between two alternative options: further isolation of the industry or civil-military integration. The mixed approaches of the 1990s have contributed greatly to the current crisis. Closing down, merger or conversion of the virtually 'hollow' part of the defense complex, elimination of duplicated sourcing, and radical reduction in the number of prime contractors are measures expected to rationalize the defense industry. The Russian defense industry is once more at a crossroads. Numerous experiments with mergers, consolidation and conversion policy have not solved its basic problems of overcapacities, resource constraints and uncertainty with respect to the security and macroeconomic framework for reform. The current government acknowledges these challenges, although whether it will choose the painful path of mass reductions and consolidation of defense industry property or a slow transition and the prolongation of the Problems into the new decade remains unclear.' (extract)'Selbst nach mehr als zehn Jahren der Umgestaltung und der zoegerlichen Konversion der russischen Ruestungsindustrie ist kein Ende in Sicht. Die Umstrukturierungsversuche waren widerspruechlich und eine dauerhafte, stabile Konfiguration ist nicht erreicht worden. Die Ruestungsindustrie wurde politisch an den Rand gedraengt: Sie hat weder die Rolle eines Motors der oekonomischen Wiederbelebung und des Wachstums angenommen, noch hat sie das technologische Niveau der zivilen Industrie angehoben, wie viele postsowjetische Regierungen es erwartet hatten. In den Spaetneunzigern wurde das Interesse an der russischen Ruestungswirtschaft als Folge der Finanzkrise von 1998, der relativen wirtschaftlichen Erholung, und den Aenderungen in der Militaerpolitik als Reaktion auf den NATO-Einsatz in Suedosteuropa, des Beginns des zweiten Tschetschenienkriegs und der Amtsuebernahme der neuen Regierung wiederbelebt. Folgende Fragen versucht diese Studie zu beantworten: Welchen Einfluss hatten der allgemeine makrooekonomische Kontext und Konzepte der Militaerpolitik auf die Ruestungsindustrie? War der militaerisch-industrielle Komplex als Institution mit seinen Grenzen, seiner Konfiguration und Mission ueberlebensfaehig? Welche Art Ruestungsindustrie wollte die politische Elite Russlands? Kam ein Richtungswechsel von 'Kanonen zu Butter' zustande? Welche Sektoren wurden fuer Kuerzungen im Verteidigungshaushalt und makrooekonomische Schocks besonders anfaellig? Welche oekonomische Wirkung hatte der aktive Teil der Ruestungsindustrie? Werden Konversionstrends der Neunziger-Jahre durch Krisen umgekehrt? Wie haben Firmen, die dem Niedergang widerstanden, Produktionswachstum erreicht? Die Ruestungsindustrie ist keine einzelne homogene Institution mehr. Seit den fruehen Neunzigern wurde sie zunehmend segmentiert. Grund dafuer waren neue Bedingungen auf dem Markt, veraenderte Besitzverhaeltnisse, Umstrukturierung nach Trennungen und Zusammenschluessen und auch der ungleiche Zugang zu internationalen Maerkten. Zwei der wichtigsten Folgerungen dieser Studie sind, dass es keinen rationalen Grund fuer die Existenz eines 'Ruestungskomplexes' gibt und dass die Regierung zwischen zwei alternativen Optionen waehlen muss: weitere Isolation der Ruestungsindustrie oder zivilmilitaerische Integration. Die gemischten Ansaetze der Neunziger-Jahre haben zu der gegenwaertigen Krise wesentlich beigetragen. Firmenschliessungen, Zusammenschluesse oder Konversion des faktisch 'hohlen' Teils des Ruestungskomplexes, die Eliminierung von Doppel-Kapazitaeten sowie weitgreifende Verminderung der Zahl der Hauptlieferanten sind Massnahmen, von denen erwartet wird, dass sie die Ruestungsindustrie rationalisieren. Die russische Ruestungsindustrie steht wieder einmal am Scheideweg. Unzaehlige Experimente mit Firmenzusammenschluessen, Konsolidierung und Konversion haben die grundsaetzlichen Schwierigkeiten der Ueberkapazitaeten, der beschraenkten Ressourcen und der Unsicherheit in Bezug auf die sicherheitspolitischen und makrooekonomischen Rahmenbedingungen fuer Reformen nicht geloest. Die jetzige Regierung erkennt diese Herausforderungen, obwohl unklar bleibt, ob sie den schmerzhaften Weg von Massenreduzierungen und der Konsolidierung der Besitzverhaeltnisse der Ruestungsindustrie oder ein Fortschleppen der Probleme in das neue Jahrzehnt waehlen wird.' (Textauszug)German title: Russlands Ruestungsindustrie zur JahrhundertwendeSIGLEAvailable from http://www.bicc.de/industry/brief17/brief17.pdf / FIZ - Fachinformationszzentrum Karlsruhe / TIB - Technische InformationsbibliothekDEGerman

Unexpected Levels of Biological Activity during the Polar Night Offer New Perspectives on a Warming Arctic

The current understanding of Arctic ecosystems is deeply rooted in the classical view of a bottom-up controlled system with strong physical forcing and seasonality in primary-production regimes. Consequently, the Arctic polar night is commonly disregarded as a time of year when biological activities are reduced to a minimum due to a reduced food supply. Here, based upon a multidisciplinary ecosystem-scale study from the polar night at 79°N, we present an entirely different view. Instead of an ecosystem that has entered a resting state, we document a system with high activity levels and biological interactions across most trophic levels. In some habitats, biological diversity and presence of juvenile stages were elevated in winter months compared to the more productive and sunlit periods. Ultimately, our results suggest a different perspective regarding ecosystem function that will be of importance for future environmental management and decision making, especially at a time when Arctic regions are experiencing accelerated environmental change