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Economic Integration Drives Ethnocentrism: Evidence from Consumer Responses to Foreign Acquisitions

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Moynihan Institute of Global Affairs 


Economic Integration Drives Ethnocentrism: Evidence from Consumer Responses to Foreign Acquisitions 

Authors: Aycan Katitas, Sonal Pandya, Raj Venkatesan

A talk by Sonal Pandya, Associate Professor of Politics, University of Virginia

Does global economic integration fuel ethnocentrism? We leverage the implied nationality of American-sounding brands to measure weekly fluctuations in local ethnocentrism following  foreign acquisitions of American firms. Changes in the market share of American-sounding supermarket brands in a given store capture the local community’s shifting attachment to American national identity. Foreign acquisitions are exogenous shocks that make national identity more salient to consumers but do not immediately change any other product characteristics. We find that the market share of American-sounding brands increases in stores located in counties where a local firm’s foreign acquisitions was announced a week prior. This finding holds for acquisitions originating in the UK and Canada but no other countries; and acquisitions in some national security sensitive industries. A placebo test with wholly domestic acquisitions verifies acquisitions more generally, and their attendant distributive consequences, do not drive our results. We establish the causal effect of global economic integration on ethnocentrism with a high external validity and using a high frequency, geographically disaggregated, behavioral measure of ethnocentrism.

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