NEW YORK, NY – Nationalism is reshaping politics and trade around the globe. It’s also a defining feature of U.S. President Trump’s “America First” trade policy, which aims to boost American businesses, though many U.S. companies are struggling to adjust to sizeable import tariffs. A new Columbia Business School study offers the first company-level evidence that companies can harness patriotic rhetoric to sharpen their market appeal and improve performance. Using machine-learning-based text analysis of more than 41,000 annual reports from Chinese public firms between 2000 and 2020, the research finds that firms have nearly doubled their use of nationalist language over the past two decades—and that those that do enjoy higher returns on assets the following year. They also found that consumer-facing businesses with more individual investors and lower sales from overseas demonstrated higher levels of nationalism.
For the study, Firms’ Rhetorical Nationalism: Theory, Measurement, and Evidence from a Computational Analysis of Chinese Public Firms, Professor Lori Yue, Associate Professor of Business at Columbia Business School, and her co-authors, Jiexin Zheng of Peking University and Kaixian Mao of Renmin University of China, developed a theoretical framework for corporate nationalism consisting of: national pride, anti‐foreign sentiment, dominant societal agenda, and corporate role—and then created word dictionaries for each dimension. They analyzed these four dimensions of nationalism by applying a machine learning method on over 41,000 annual reports from Chinese public firms between 2000 to 2020, focusing on the “managerial discussion” sections of these reports, which help investors understand their performance and strategies. They then validated their analysis using data from the Chinese Private Enterprise Survey, a representative survey of private companies’ leaders to assess whether they display the four dimensions of rhetorical nationalism. Their analysis found that overall, Chinese public firms nearly doubled their use of nationalistic rhetoric during the last two decades, and companies that are state-owned, older, larger, more profitable, consumer-facing, and with more individual investors and lower overseas sales were more likely to adopt this language. They also found that companies that demonstrate nationalism have a higher return on assets in the following year through driving domestic sales. Professor Yue and her co-authors made their analytical code and dataset publicly available for future research to continue studying the relationship between nationalism and business within and beyond China.
While the researchers find compelling evidence that companies can gain a competitive advantage over domestic and international rivals by adopting nationalistic rhetoric, it can be a double-edged sword and business leaders must weigh the advantages and consequences of doing so.
