One-Third of Foreign Firms Exited Russia Within 18 Months

🔍 Why This Study Matters

Rachel Wellhausen and Boliang Zhu examine how an unprecedented interstate war—the Russian invasion beginning 24 February 2022—reshaped the presence of foreign firms inside the Russian economy. The question: when host states face war, sanctions, and public backlash, do multinational firms leave, and what political forces shape those exits?

🧾 What the Authors Mean by 'Exit'

Exit is treated not as a simple market choice but as a politicized transaction: sellers and buyers face external pressures (sanctions, reputational backlash, and state intervention) and must bargain over terms. This framing highlights how political actors and industry characteristics can influence whether a foreign investment is sold, transferred to local managers, or becomes inactive.

📊 Data and Methods

• The authors use Russian company registration records to track more than forty thousand foreign-invested firms that were operating in Russia on 24 February 2022.
• They follow ownership status and activity over the next 18 months to identify changes in ownership or inactivity.
• Analysis links firm outcomes to industry classification, managerial control, and whether firms operate in sectors Russia considers strategically important.

🔎 Key Findings

• After 18 months of war, 33.3% of foreign-invested firms had either changed ownership or become inactive.
• Firms in consumer-oriented industries were more likely to exit, consistent with reputational and market pressures driving sales or closures.
• Russian state interests mattered in the bargaining phase: foreign firms already under Russian managerial control were more likely to change hands or exit, while firms in formally designated Russian strategic industries were not more likely to exit.

🗺️ What This Suggests for Economic Statecraft

Even amid sweeping sanctions and public pressure to cut ties, multinationals proved unstable and uneven instruments of state coercion or influence. The findings show that industry exposure and the degree of local managerial control can be decisive in determining which foreign firms leave, which remain, and how the state shapes those transitions.