How trade sanctions impact MNE subsidiaries in Russia: Responses to legitimacy concerns and performance

Sihong Wu and Snejina Michailova

Journal of World Business, 2025, vol. 60, issue 5

Abstract: How do MNE subsidiaries respond and perform after their home country imposes trade sanctions on the host country? To answer this research question, we apply a legitimacy lens, focus on Russia, and test four hypotheses using a dataset (1994–2022) that includes country, firm, and media data. Based on a sample of 676 MNE subsidiaries from 41 countries and text analysis of over 13,000 announcements, we find that sanctions increase subsidiaries’ stakeholder-oriented responses and negatively affect their performance. Subsidiaries with greater local experience are less likely to respond immediately, resulting in more severe performance declines compared to new entrants. Our analysis of news outlet posts further shows that negative public sentiment toward the sanctioning host country intensifies pressure on subsidiaries to respond. These findings enrich the international business literature on sanctions and contribute to ongoing scholarly discussions about the relationship between sanctions, legitimacy, and performance.

Keywords: Trade sanctions; Mne subsidiaries; Russia; Legitimacy; Public sentiment; Performance (search for similar items in EconPapers)
Date: 2025
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DOI: 10.1016/j.jwb.2025.101664

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