A Study on The Influence of Host Country Political Risk and Cross-national Distance on Overseas Enterprise Performance

Abstract

The Influence of Host Country Political Risk and Cross-national Distance on Overseas Enterprise Performance WEI CHANG Dept. of Business Administration The Graduate School Hanyang University In recent years, the influence of the relationship between the host country and the home country on the internationalization of multinational enterprises has been a hot topic. What are the effects of political risk and cross-national distance on the performance of multinational enterprises? Whether these effects are influenced by other variables? On this basis, predecessors have done in-depth research and discussion, but they are limited to the relationship between a single variable. For example, in the study of the impact of political risk on the performance of overseas enterprises, most scholars only consider the impact of government corruption and political unrest in the host country on the performance of overseas enterprises but do not consider these factors together. This paper attempts to combine these two variables to further study the impact of the host country’s political risk and country distance on overseas enterprise performance. The political risk is mainly from the instability of the political system and regime conflict. Cross-national distance is mainly from two aspects: cultural distance and institutional distance. To change the negative impact of political risk and cross-national distance, this paper also verifies whether ESG performance can moderate the relationship between the two to a certain extent. Globally, companies are increasingly paying attention to the impact of environmental, social, and governance (ESG) on enterprise performance. But no studies have explored it as a moderating variable yet. At the results of this paper, it is found that the political risk of the host country and the cross-national distance between multinational countries have a negative impact on enterprise performance. The higher the political risk, the lower the enterprise performance; the greater the cross-national distance, the lower the corporate performance. However, as enterprises strengthen their good ESG performance, the negative impact of host country political risk and cross-national distance on enterprise performance will be weakened. This paper not only enriched the research on the influence of host country political risk and cross-national distance on overseas business performance but also, at last, provides useful practical enlightenment for multinational enterprises on how to reduce the risk caused by host country political risk and cross-national distance and improve overseas business performance. Key Word: Enterprise Performance, Political Risk, ESG Performance, Instability of Political System, Power Conflict, Cross-national Distance, Culture Distance, Institutional Distance, etc.