Political Markets and Regulatory Uncertainty: Insights and Implications for Integrated Strategy

Abstract

Executive Overview Managers can craft effective integrated strategy by properly assessing regulatory uncertainty. Leveraging the existing political markets literature, we predict regulatory uncertainty from the novel interaction of demand- and supply-side rivalries across a range of political markets. We argue for two primary drivers of regulatory uncertainty: ideology-motivated interests opposed to the firm and a lack of competition for power among political actors supplying public policy. We align three previously disparate dimensions of nonmarket strategy—profile level, coalition breadth, and pivotal target—to levels of regulatory uncertainty. Through this framework we demonstrate how and when firms employ different nonmarket strategies. To illustrate variation in nonmarket strategy across levels of regulatory uncertainty, we analyze several market entry decisions of foreign firms operating in the global telecommunications sector.