Transforming Geopolitical Risk: Public Diplomacy of Multinational Firms for Foreign Audiences

This article addresses the strategies of multinational firms when faced with business risk arising from nationalist tensions and interstate conflict, focusing on the use of social engagement activities under the rubric of corporate social responsibility (CSR) that are targeted at the host country's society at large. The adoption of this strategy is contingent on firms' risk perception: firms with higher degrees of risk perception invest more resources in social strategies. Moreover, as firms are more exposed to risk over time, they shift their risk management strategies to ones that try to transform the nature of risk through private sector activities that resemble public diplomacy. The argument is tested quantitatively using unique data on the contributions of Japanese firms to social engagement activities in China, and qualitatively with descriptive statistics from surveys of CSR activities and elite interviews with state and business actors in China and Japan. The findings highlight new sociopolitical roles for multinational firms in international politics.