MICROPOPULISM · The micro-foundations of macro-institutions: an empirical investigation of the co-evolution of populist rhetoric and organizations

The micro-foundations of macro-institutions: an empirical investigation of the co-evolution of populist rhetoric and organizations

In recent years, populist movements such as the “Brexiteers” in the UK, Fidesz in Hungary, and Italy’s Five Star Movement have changed the political landscape in Europe. Populist leaders often challenge established economic policies and institutions, reshaping public perceptions of what is acceptable in politics and business. These movements not only challenge institutions but also alter the environments in which multinational enterprises (MNEs) operate. Despite extensive research on how institutions influence MNE behavior, little attention has been given to the political actors and rhetoric that define these institutions. This project fills this gap by examining how populist leaders, through their discourse, ideology, and personal characteristics, affect foreign direct investment (FDI). Populist rhetoric signals potential institutional instability, regulatory unpredictability, and shifting norms about globalization and business. Yet its effects are heterogeneous: populist leaders differ in ideology, attitudes toward markets and global integration, and personal traits. The project explores how these variations, particularly in gender and education, shape the impact of populism on FDI. Female leaders may pursue more cooperative and pragmatic governance, reducing risk for foreign investors, while leaders with international education may balance nationalist rhetoric with economic pragmatism. At the same time, the project recognizes that MNEs are not passive actors. Through employment, investment, and corporate political activities or corporate social responsibility initiatives, they influence the economic and social conditions that can either fuel or mitigate populist sentiment. This co-evolutionary relationship, where MNEs both shape and are shaped by populist environments, remains underexplored. The project introduces a dual-pathway framework linking the “supply side” of populism (leaders’ rhetoric and signaling of institutional change) and the “demand side” (public sentiment and stakeholder activism reacting to globalization and corporate behavior). This study examines the co-evolution between populism and MNEs, revealing how political rhetoric and corporate strategies mutually shape each other and is important in three ways. First, provides a better understanding about the microfoundations behind institutions. Second, it advances understanding of how political actors shape business environments and provides concrete evidence of how populist rhetoric, in combination with individual characteristics, influences where and how companies invest. Third, this study introduces a dual-pathway framework showing how MNEs shape populist rhetoric by simultaneously creating local economic and social grievances and influencing political discourse through their activities.

Data: CORDIS, © European Union