Prof. Wernicke’s study examines how firms respond to a sudden rise in political risk when a foreign country becomes delegitimized. Using a legitimacy-based framework, it argues that business activities in such a country create legitimacy threats, particularly as public opposition in firms’ home countries challenges the continuation of operations. The extent of these threats depends on firms’ business exposure, with greater exposure increasing the likelihood of exit.

Beyond direct exposure, the study suggests that two additional factors shape firms' responses. First, heightened public attention in the home country amplifies legitimacy threats, making it more difficult for firms to justify continued operations. Second, the host country’s perception of the home country as an adversary further reinforces these threats, pressuring firms to reconsider their presence. Together, these factors influence whether and how firms disengage from politically risky environments.

Empirical analysis focuses on Russia’s 2022 invasion of Ukraine, which, in the eyes of Western countries, morally delegitimized Russia as a business partner. The findings support the study’s arguments, showing that legitimacy threats played a key role in Western firms' decisions to exit Russia. Additional analyses indicate that many of these firms redirected their business activities to neighboring post-Soviet countries, suggesting a strategic reallocation rather than a complete withdrawal from the region.

Georg Wernicke is the Dieter Schwarz Foundation Chaired Associate Professor of Strategy at HEC Paris, where he has been since 2018. He holds a Ph.D. in management from the University of Mannheim and has previously taught at Copenhagen Business School, with visiting positions at NYU, Northwestern, and INSEAD.

His research focuses on corporate governance, boards of directors, corporate social responsibility, sustainability, and purpose. His work has been published in top journals like the Academy of Management Journal and Strategic Management Journal, earning several awards, including the Oxford University Centre for Corporate Reputation Best Dissertation Award and the 2022 Best Paper Award from the German Academic Association of Business Research. In 2024, he joined the board of the International Corporate Governance Society and now chairs the Stakeholder Strategy Interest Group of the Strategic Management Society.

At HEC Paris, he teaches core strategy courses in the MBA program and offers courses in governance and sustainability across other programs. He won the 2023 Pierre Vernimmen Teaching Prize and directs the “Be an Effective Board Member” specialization in the EMBA program.

You can learn more about Professor Georg Wernicke here.