Business and violent conflict as a multidimensional relationship: The case of post-Reformasi Indonesia

Abstract

The private sector and multinational companies (MNCs) have become an important part of the peace and conflict landscape. This article uses the Indonesian context to explore the foreign MNC-conflict relationship in the manufacturing sector and to add nuance to existing debates on the potential of MNCs in providing peacebuilding support via their investment or operational impacts or their potential negative effects. We analyze the effects of various dimensions of corporate investment-based presence on violent conflicts, utilizing a cross-sectional model at the district level. We find that in industrial subsectors that are upward in the value chain, intensive in raw materials, and entail low-skilled work (e.g., heavy industries, food and tobacco), foreign firm presence exacerbates local violent conflicts. Results in other sectors further down the value chain confirm the potentially positive role of MNCs in peacebuilding. These findings are also relevant to the wider CSR literature in that the relationships between host countries and MNCs in fragile or conflict-ridden areas are more complex than previously acknowledged, calling for additional research into sector-specific variances on business impacts in fragile and conflict-affected settings.