ABSTRACT Economic sanctions disrupt international business by increasing uncertainty and forcing companies to reassess their operations in the sanctioned market. Following Russia's invasion of Ukraine in February 2022, US companies faced critical strategic decisions regarding their business activities in Russia. This study investigates how market presence—measured through foreign direct investment (FDI) and international trade (export)—influenced the initial responses of 241 S&P 500 firms to the international economic sanctions against Russia. The findings reveal that companies with FDI in Russia were more likely to scale down or suspend their business operations rather than continue business as usual, freeze new investments or withdraw from Russia entirely. Firms exporting to Russia were more likely to suspend their exports. The study further identified a statistically significant relationship between the timing of 240 S&P 500 firms' initial response announcements and their market presence. Firms that exported to Russia were more likely to act as leaders, announcing their initial sanction response within 10 days after the invasion, while firms with FDI in Russia were more likely to act as followers, announcing their responses later. The study results underscore the importance of market presence in shaping corporate strategies amid geopolitical crises and economic sanctions.
Hofmann et al. (Mon,) studied this question.