Nationalistic sentiments have been on the rise globally for more than a decade. “It's very clear in every major country,” says Lori Yue, associate professor in the Management Division at Columbia Business School. “In the United States, it’s exemplified by Donald Trump's 2016 election, and in the UK by Brexit, but many other countries are also electing these kinds of populist, nationalist candidates.”
She adds, “In the domains of international business and strategic management, the implications of this trend is a big question. Of course, nationalism can affect international business, because it implies that other countries may be inferior in some way. But it may also affect the strategy of domestic firms, using it as an opportunity to disadvantage their domestic and international rivals.”
To understand the impact of this growing trend, Yue turned her attention to her home country, China. “Nationalism is a very influential ideology in China,” she says.
Key takeaways:
- Firms that are state-owned, older, larger, more profitable, and consumer facing, with more individual investors and lower sales from overseas, demonstrated a higher level of nationalism.
- Contrary to what an observer might expect, that nationalism wasn’t driven by government subsidies — it was more strongly driven by firms’ motivations to appeal to domestic investors and consumers.
- Companies with higher nationalism scores are associated with better performance than companies with lower scores.
How the research was done: The researchers faced novel challenges in approaching this work. “How do you measure a firm’s nationalism?” Yue notes. “Nationalism has traditionally been measured at the country level — you can survey a representative sample of individuals and you can maybe come up with a score at the country level. But there has never been a firm-level theory.” Because of that, the team had to start with the broadest question: What does it mean to have firm-level nationalism, and how does it actually manifest?
The researchers proposed four dimensions of nationalism on the firm level. First, the firm can show national pride. That can look different in every country. “In the United States, we’re proud of democracy, science, the economy, and the military. In China, they're proud of their national history and heritage,” Yue says. Second, a firm may exhibit anti-foreign sentiments. Third, there may be a dominant nationalist agenda (e.g., “Make America Great Again”). Finally, the firm can envision its own role in fulfilling the society's dominant nationalist agenda, like hiring only citizens of that country. As such, the theory of firm-level nationalism can be generalized to the context of many countries.
Once they overcame that theoretical hurdle, Yue and her co-researchers assembled over 40,000 annual reports from Chinese public firms from 2000 to 2021, focusing on the “managerial discussion” section, which elaborates on performance and strategy. “We leveraged a state-of-the-art machine learning method that can calculate the 100 words that most closely represent nationalist sentiments,” Yue explains. After verifying the data set, they assigned a nationalism score to each company. The data set is groundbreaking on its own. “The paper only came out in May, and I already know of three other papers using our data set,” says Yue.
What the researcher found: In their first analysis, the team found that firms that are state-owned, older, larger, more profitable, and consumer facing, with more individual investors and lower sales from overseas, demonstrated a higher level of nationalism. Once the researchers came to that conclusion, they were able to take the research a step further: “Initially, I only studied what kind of firm is more likely to have high or low scores for nationalism,” says Yue. “But CBS colleagues pressed me to understand: What is the outcome of this? If you're nationalistic, are you going to perform better?”
The researchers found that companies with higher nationalism scores are associated with better performance than companies with lower scores. Moreover, they found that, contrary to what an observer might expect, that nationalism wasn’t driven by government subsidies — it was more strongly driven by firms’ motivations to appeal to domestic investors and consumers.
Why it matters: With nationalism rising globally, the study provides a new measure for firms’ rhetorical nationalism. “It’s going to be more and more important,” says Yue. “Nationalism has been rising for the past 15 years, and I don't see the trend reversing.”
By making their data set public, Yue and her colleagues can facilitate future research on the relationship between nationalistic ideology and the business community. “We were able to lay down the foundation and provide a framework of data, so other scholars can also build on the stream of research,” Yue says. In addition, the researchers have recently updated their data to 2023.
Adapted from “Firms’ Rhetorical Nationalism: Theory, Measurement, and Evidence from a Computational Analysis of Chinese Public Firms” by Lori Qingyuan Yue of Columbia Business School, Jiexin Zheng of HKUST Business School, and Kaixian Mao of the Renmin University of China.
