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Sanctioned to Survive: How Foreign Firms Perform when Economic Sanctions Affect their Business Relationships—A Study of Contemporary Economic Sanction Actions and their Impact

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The intent of this study is to examine the effects of economic sanctions on companies with significant FDI operating in the sanctioned country. Using case study methodology, we consider the impact of sanctions imposed on the Russian Federation (RF) by the United States of America for its intrusion into the sovereign rights of Ukraine. Past sanction events in South Africa and pre-RF formation are reviewed. Two measurable frameworks are developed to study strategies based on ‘divestment and non-divestment’ (Malone and Goodin 1997) dimensions and coupled with variables related to ‘direct and indirect’ effects on financial performance, forgone potential, (Losman 1988) and foreign direct investment (Biglaiser and Lektzian 2011). This research also relies on the historical accounts of Hufbauer et al. (2007) for the compilation of facts related to economic sanctions. Through literature review, the study asks: 1) Strategically, how does a company respond to the economic sanctions imposed by its home country on the sanctioned country in which it has significant FDI? 2) Financially, how do economic sanctions affect the company’s performance and FDI? and 3) Organizationally, how do economic sanctions affect the relationships with those recipient companies of FDI? The study focus is on the energy industry in which the RF economy relies upon for 40 percent of its sustainability and the company of focus is Exxon Mobil (XOM). The author readily acknowledges that a single case study may not provide the degree of conclusiveness found in a cross-case study format. However, the outcome of the study does provide a template for use in future case reviews.

Affiliations: 1: College of Business and Innovation, University of Toledo


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