Dark Side of Political Ties: Failure Case of Russian MNE Rusal in Montenegro

Abstract

It is widely recognized that corporate political ties (CPT) in general lead to better organizational performance and higher firm value (Fisman, 2001; Frynas, Mellahi and Pigman, 2006; Goldman, Rocholl and So, 2009) however there are empirical evidence that the presence of CPT under certain circumstances causes negative effects on firm value (e.g. Aggarwal, Meshke & Wang, 2012; Hersh, Netter & Pope, 2008). The investigated case of Rusal's investments in Montenegrin aluminum plant demonstrates that CPT did not improve the organizational performance but even result in Rusal escaping from Montenegro. The aim of the study is to reveal/uncover the process through which corporate political ties (CPT) transform from valuable asset to a costly liability by unswerving following research questions: why corporate political ties change over time? And how this change impacts the MNE strategy in the foreign market?