Should we stay or should we exit? Dilemmas faced by multinationals under sanctioned regimes

Abstract

This study investigates how multinational enterprises (MNEs) navigate sanctioned regimes using the Myanmar context following a 2021 military coup. We find that without formal institutional pressures, MNEs exit voluntarily due to informal stakeholder pressures. However, such exits are often considered irresponsible as MNEs transfer assets to unethical buyers or the sanctioned regime, thus potentially worsening the human rights conditions. We provide eight propositions that define a responsible exit from a sanctioned regime. This study offers insights into the multifaceted nature of strategic exits thus articulating ethical dilemmas faced when exiting from foreign markets amid sanctions-induced challenges, real or perceived. This study proposes a framework outlining the interplay between formal and informal institutional pressures placed on MNEs in sanctioned regimes, thus theoretically contributing to the institution-based view by highlighting legitimacy concerns and reputational management strategies employed by MNEs.