Fox School of Business, Philadelphia

Shifting landscapes: Impact of climate risk on MNEs’ OFDI location decisions \& the moderating role of network effects

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Abstract

This study demonstrates the effect of increasing climate risk on the foreign direct investments (FDI) location decisions of MNEs and highlights the network contingencies faced by MNEs when making these decisions. Using the context of the global automobile industry between 2003 and 2019, we demonstrate that the negative externalities of climate risk reduce the likelihood of MNEs locating their FDI in high-climate-risk locations and the magnitude of their investments. Further, we show that increasing connectedness of the country-of-origin of MNEs in global OFDI networks increases the MNEs’ informational advantages. Thus, MNEs from more connected country-of-origin are less likely to locate their FDI in high-climate-risk locations. However, we also find that increasing embeddedness of MNEs in the global industry-wide FDI collocation networks increases isomorphic pressures and imitative tendencies of MNEs. Thus, MNEs more embedded in FDI collocation networks are more likely to locate their FDI in high-risk locations.

Biography

Soni Jha is an Assistant Professor at the Purdue University Fort Wayne and will soon be awarded her PhD by Temple University. Soni is a researcher focused on using theories of connectivity and network analysis to explore various business phenomena related to strategic management and international business. Her primary area of interest is how the interfirm connections impact competitive structures and strategic decision-making and the performance of the MNEs. In her dissertation, she explored the multi-layered structure of foreign direct investment (FDI) and whether/how MNEs membership across different layers of FDI networks has different implications for their performance and productivity. Her prior research has been published in the Global Strategy Journal (GSJ) and the Journal of International Business Studies (JIBS).