Multinational enterprises (MNEs) often enter conflict-affected countries as political and institutional conditions improve. This research finds that while peace agreements can open the door for foreign direct investment (FDI), MNEs with strong political and ESG (environmental, social, governance) capabilities are less reliant on these changes—they can leverage their own strengths to seize opportunities even amid lingering instability.
The study reveals that for less capable firms, stable political environments and peace deals are critical for FDI decisions. In contrast, MNEs with robust non-market capabilities—like skilled political negotiation or strong ESG standards—are better positioned to “arbitrage” institutional differences and succeed in volatile contexts. This means that positive institutional changes, though important, have a bigger influence on firms lacking these internal advantages.
For global companies and policymakers, the lesson is that building non-market strengths matters as much as following institutional changes. Firms with political savvy and ESG leadership are uniquely equipped to thrive in emerging post-conflict markets, while others should pay close attention to the pace and credibility of peace and policy reforms when considering new investments.