A research study on Western companies said to be still operating and investing in Russia has led to a heated war of words between a pair of academics in Switzerland and a Yale professor some 4,000 miles away.
The research from Professor Simon Evenett at the University of St. Gallen, just East of Zurich, and International Institute for Management Development Professor Niccolò Pisani in Lausanne, says a number of companies based in the European Union and Group of Seven nations are still operating in Russia.
When Russia invaded Ukraine on Feb. 24, 2022, a total of 2,405 subsidiaries owned by 1,404 companies in the EU and members of the G-7 were active in Russia, according to the research. In late November, less than 9% of the pool of companies, or 120, had divested at least one subsidiary in Russia, say the researchers.
The paper, which has been available on the website of the Social Science Research Network since Jan. 13, has sparked a clash between Yale professor Jeff Sonnenfeld and his research colleague Steven Tian, and the researchers out of Switzerland.
In an email to MarketWatch Friday, Sonnenfeld and Tian questioned the integrity of the data set used in the University of St. Gallen and IMD study, which they said also contains a lot of misclassifications, and misrepresents some companies, treating Russian ones as though they were Western companies, and individuals as if they were Western companies.
Yale’s research shows that 1,300 companies have left Russia.
See Now: Despite talk of a ‘vast exodus,’ many Western firms still operating in Russia, Swiss researchers say
“We are appalled by the way Professor Jeffrey Sonnenfeld and his Research Assistant Steven Tian have called the rigor and veracity of our colleagues’ work into question,” said the University of St. Gallen and IMD, in a joint statement provided to MarketWatch Friday.
Sonnenfeld is a professor at the Yale School of Management and CEO of Yale’s Chief Executive Leadership Institute. Tian is research director of the Chief Executive Leadership Institute.
The Yale professor says that the research around Russia companies is crucially important to the narrative around the conflict in Ukraine.
“The reason this matters is because it fuels Putin’s narrative that the companies never left and that their economy is resilient,” Sonnenfeld told MarketWatch.
“This is intended to undermine the unity of the global business retreat—a critical element of the effective economic boycott—along with government sanctions -which strangles his wartime economy,” the Yale professor said.
“In particular, the business retreat is not seen as diplomatic vindictiveness of the West against a rising Russia but is seen by average Russians as a rejection of Russia as a rogue nation by independent business leaders in the private sector globally,” Sonnenfeld added.
See Now: Companies that exited Russia after its invasion of Ukraine are being rewarded with outsize stock-market returns, Yale study finds—and those that stayed are not
In their study on the Social Science Research Network, Evenett and Pisani say they downloaded data from the Orbis companies’ database on “approximately 36,000 firms with active operations in the Russian Federation.” On Friday the researchers posted supplementary data to the SSRN website containing the list of all the active firms.
But Yale’s Sonnenfeld slammed the list. “Their anchoring is, in fact, a massive database of largely Russian firms,” he told MarketWatch, via email Sunday, adding that “hundreds” of Western companies are missing from the list.
In a statement Evenett and Pisani said they performed a number of “robustness checks” on their research. “We noticed that some of the ultimate owners of foreign companies that had operations in Russia were individuals with Russian names,” the researchers said. “As a result, we performed a robustness check that drops any company where an individual is the named owner in the ORBIS database.”
“Do these 36,000 firms exactly correspond to the ‘true population’ of all firms active in Russia according to the criteria used to select them from ORBIS?” they wrote, in the statement. “It’s nearly impossible they correspond to the exact true population as any scholar, especially those focusing on emerging markets research, would anticipate.”
In their study Evenett and Pisani point to extensive research on companies exiting Russia conducted by Kyiv School of Economics. However, Nataliia Shapoval, director of the Kyiv School of Economics, which runs the “Leave Russia” project, said the study “oversells what it actually studies,” in a statement.
“We did not oversell at all what we studied,” Evenett and Pisani said, in a statement emailed to MarketWatch Tuesday. “On the contrary, we were very careful and did several checks and additional analysis. As discussed in the paper, our results indicate that the true percentage of complete exit by EU and G-7 companies may actually even be lower than 8.5%.”