The Economist: Does national pride have its place in the workplace?

Canadian nationalism is very unlikely to get out of hand. But when even the politest people on Earth are wrapping themselves in the flag, you know that national pride is on the march. Donald Trump’s talk of making America’s northern neighbour into the 51st state has prompted Canadians to buy maple-leaf flags, cancel southbound travel plans and boo the American anthem at sporting events. It’s not exactly Nuremberg, but it is striking.

Mr Trump sees nationality as the defining characteristic of global commerce: if you’re not an American firm, you’re a potential target. It’s not just him. Around the world autocrats and populists routinely appeal to national identity. The Chinese Communist Party paints China’s ascent as a national endeavour. Alex Karp, the founder of Palantir, a military-technology firm, has just co-written a book arguing for the virtues of patriotism in defence of Western values. For bosses, the rising salience of national identity raises a question: does it make sense to join in?

The answer, according to Lori Yue of Columbia Business School, is that it might. Ms Yue and her co-authors published a paper last year that analysed 41,000 annual reports issued by Chinese public firms in 2000-20 for nationalist rhetoric. The researchers found that in aggregate companies’ use of nationalistic language rose sharply in that period.

The firms that used more nationalistic language tended, unsurprisingly, to be state-owned. They were more likely to be consumer-facing than to sell to other businesses. And they were more likely to have individual shareholders and less likely to sell abroad.

Whether these firms were motivated by ideology or calculation, they benefited. Companies that used more nationalistic language tended to have a higher return on assets in the following year because they made more money in the domestic market. In a follow-up paper Ms Yue and her co-authors found evidence that for some Chinese firms, a greater sense of national mission was associated with less commitment to corporate social responsibility efforts related to employees. She hypothesises that if workers derive a greater sense of meaning from serving the national interest, then they may be willing to forgo other benefits.

The same approach was used in a paper by Pantelis Kazakis of the University of Glasgow; he found that more intense nationalistic language is associated with greater levels of tax avoidance. He speculates that chest-beating firms may have closer ties to the government, more sense of entitlement because of their contribution to domestic employment or less fear of reputational harm from paying less tax.

Before everyone starts handing out flag lapel pins and singing the national anthem, some words of caution. Firms that make lots of money abroad may risk a backlash in overseas markets if they are perceived as anti-foreign. An analysis in 2019 by Alexander Mohr and Christian Schumacher of Vienna University of Economics and Business found that patriotic rhetoric on the part of S&P 500 firms hurt those with more sales and assets abroad. In Ms Yue’s research, it is notable that companies founded after China’s accession to the World Trade Organisation in 2001 were less likely to use flag-waving rhetoric.

Changes in the geopolitical landscape can suddenly alter the costs and benefits of being strongly associated with a country, as American exporters to Canada are now finding. Nationalism can be divisive at home, too; if aggressive displays of national identity are associated with a specific movement (America First, say), then flag-waving firms may turn some consumers off.

Even if firms don’t embrace nationalism, however, they will be affected by it. A paper by Khan-Pyo Lee of Sogang University in South Korea and his co-authors suggests that managers who work for foreign multinationals identify less strongly with their employers than those who work for domestic firms. A recent study by Arnab Choudhury of Columbia University and his co-authors found that domestic firms were more successful than foreign ones in patent disputes adjudicated in American federal district courts between 1983 and 2016. In a world of retaliatory tariffs and rising trade barriers, a company’s passport counts whatever its rhetoric.

Ms Yue’s sensible advice to bosses is to be balanced. Nationalism can make sense as a strategic choice for some companies, but they need to be measured. Canadian, you might say.