Non-market Strategies in Response to Targeted Sanctions of International Business

Abstract

Non-market strategies are a tool that multinational enterprises (MNE) use to enhance their ability to adapt to the international market. In this paper, we examine the case of politically initiated targeted sanctions on Russian firms and the non-market strategy reaction those firms engage in to counter the effects of targeted sanctions. Russian firms have become adept at corporate political activity and strategic CSR to build and burnish their reputations and competitive advantage. We employ a combination of quantitative and qualitative analysis to assess the impact of sanctions. Our research indicates that sanctioned firms mainly actively adapt to sanction regimes and, in so doing, mitigate the economic impact of these targeted sanctions. We find evidence of governmental shielding only for the finance industry. This research implies that while target sanctions create symbolic meaning in foreign relations and create financial friction for targeted firms and individuals, firms use adaptation strategies that negate the economic impact of these sanctions. Sanctioned Russian firms seem to have restructured their international holdings subject to sanctions to avoid the harmful effects of these sanctions.