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In the crossfire: Multinational companies and consumer boycotts

Wei Shi and Jingran Wei

China Economic Review, 2023, vol. 77, issue C

Abstract: Multinational firms face challenges as geopolitical tensions are rising when stakeholders may have divergent views on contentious issues. Sharply different attitudes toward the proposed extradition law by the Hong Kong SAR Government in 2019 and related issues were observed among some residents in mainland China and Hong Kong. While firms such as Cathay Pacific Airways expressed support of the government, it was perceived by some of its customers in mainland China that the firm was hostile to them due to the views expressed by some of its staff based in Hong Kong. In this paper, we estimate the impact of such perceived divergent staff political attitudes on consumer demand. Using a triple differences design that controls for changes in market demand and supply conditions, we find that passenger volumes from mainland China were adversely affected for Cathay Pacific, leading to a monthly decrease of approximately 20%, after contentious political views of some of its staff were widely reported in mainland China. However, the negative effects subside within a quarter. Further analysis reveals heterogeneity in consumer responses by regions, with passengers from South East Asia or countries having closer migration or trade ties with mainland China behaving similarly with those from mainland China.

Keywords: Boycott; Political conflict; Airlines; China (search for similar items in EconPapers)
JEL-codes: F14 F51 F52 (search for similar items in EconPapers)
Date: 2023
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DOI: 10.1016/j.chieco.2022.101882

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China Economic Review is currently edited by B.M. Fleisher, K. X. D. Huang, M.E. Lovely, Y. Wen, X. Zhang and X. Zhu

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