This study uses history-informed research to understand the role of nationalistic political rhetoric in new venture creation. Building on the boomerang effect that explains how strategic communications can sometimes produce unintended outcomes, we theorize that nationalistic political rhetoric backfires with frequent use. Placing the study in the context of pre-reform India, we found that while nationalistic political rhetoric was positively associated with new venture creation, higher frequency of nationalistic rhetoric led to a decrease in new venture creation. The boomerang effect of nationalistic political rhetoric was mitigated by nationalistic political action, i.e., state-owned enterprises reduced the negative effect of frequent political rhetoric on new venture creation. The study extends the conversation on deglobalization by incorporating informal institutions. It shows that political efforts to insulate an economy through voluntary social compliance yield positive outcomes but only when used in moderation or in combination with political action. High levels of nationalistic political rhetoric boomerangs and damages the local economy.
