Decoupling from China? U.S. Firms’ Partisan Positioning and Supply Chain Strategy

Posted: 1 Nov 2022

See all articles by Bo Yang

Bo Yang

University of Southern California - Management and Organization Department

Jinyuan Song

Donald G. Costello College of Business at George Mason University

Yifan Wei

I.H. Asper School of Business, University of Manitoba

Jing Li

Simon Fraser University

Date Written: September 21, 2022

Abstract

Escalating geopolitical tensions between countries may lead to a country’s adoption of foreign economic policies that promote economic decoupling from the rival country. Our study examines which multinational enterprises (MNEs) tend to embrace their home government’s decoupling policies in their supply chain strategies in the rival country, and why they do so. We adopt a political exchange perspective to suggest that MNEs’ partisan positioning—that captures long-term, relational exchanges between MNEs and a political party—is a key determinant of their embracing of decoupling policies. Using a novel dataset on U.S. MNEs’ supply chains in China and a difference-in-differences design, we find evidence supporting our hypotheses. Specifically, we find that during the Trump administration (where there were calls for economic decoupling from China), U.S. MNEs with Republican-leaning positioning had fewer Chinese suppliers than other MNEs. This relationship was more salient when firms were in industries that involved national security and less so when firms earned a higher share of their revenue from China. Our study informs the international business and corporate political activity literatures by highlighting the role of firms’ domestic partisan positioning in their global strategy in the era of geopolitical rivalry.

Keywords: Geopolitical rivalry, decoupling policy, partisan positioning, supply chain

JEL Classification: M16, M48

Suggested Citation

Yang, Bo and Song, Jinyuan and Wei, Yifan and Li, Jing, Decoupling from China? U.S. Firms’ Partisan Positioning and Supply Chain Strategy (September 21, 2022). George Mason University School of Business Research Paper Forthcoming, Available at SSRN: https://ssrn.com/abstract=4248117

Bo Yang

University of Southern California - Management and Organization Department ( email )

United States

Jinyuan Song

Donald G. Costello College of Business at George Mason University ( email )

Fairfax, VA 22030
United States

Yifan Wei (Contact Author)

I.H. Asper School of Business, University of Manitoba ( email )

181 Freedman Crescent
Winnipeg R3T 5V4, Manitoba R3T 5V5
Canada

Jing Li

Simon Fraser University ( email )

8888 University Drive
Burnaby, British Colombia V5A 1S6
Canada

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