Foreign Director Exit in the Midst of Deteriorating Bilateral Political Relations

Abstract

Amid global geopolitical realism pushing for a race of hegemonic rivalry nowadays, an outflow of global human talents is a pressing organizational concern. Our study draws attention to the underexamined phenomenon of the exit of foreign directors from their host countries during geopolitical tensions. Theorizing from a sensemaking logic, we posit that the deterioration of bilateral political relations serves as an unexpected event that activates foreign directors’ schemas for dual identity conflict, propelling them to react behaviorally to such identity threats by exiting the board in the host country. In addition, we further posit that the sensemaking process is contingent on how the foreign director draws cues from the embedded social context, including organizational identification, socialization and homophily effect, and socioemotional climate. Our empirical analyses from a sample of 1,014 foreign directors in China from 1999 to 2018 provide strong and robust support for the hypotheses. This study instills important theoretical insights into the transcending impacts of international relations and geopolitics, international governance and foreign directors, and the situated cognitive process of sensemaking regarding the intertwining effects of cognitive schema and social contexts.