Nonmarket Actions Research Articles

We Fly Congress: Market Actions as Corporate Political Activity in the U.S. Airline Industry

The literature on corporate political activity (CPA) generally views nonmarket actions aimed at influencing political actors (e.g., lobbying or campaign contributions) as related but separate activities from market actions. This study demonstrates how firms’ core market actions (e.g., market entry or geographic expansion) can function as CPA. We theorize two mechanisms through which firms leverage market actions as CPA: “pork” (i.e., ones that primarily benefit a politician’s constituents) and “perk” (i.e., ones that directly benefit the politician). We document these mechanisms through an empirical analysis of data from the U.S. airline industry in 1990–2019. Specifically, we find that airlines increase the supply of flights from the airports in the home district of the chair of the Transportation Committee in the U.S. House of Representatives (pork). We also find that the airlines increase the supply of nonstop flights to Washington, DC. from the Chair’s district (perk). We use counterfactual estimation methods and exogenous turnovers in committee leadership to provide causal evidence. Moreover, the observed increase in flight supplies is negatively associated with formal policy changes in Congress, and with text mining techniques, we find that this effect is stronger for bills related to aviation safety and security. We contribute to the literature on CPA by demonstrating a blurred boundary between market and nonmarket actions, which helps explain firms’ competitive actions that cannot be explained by market considerations alone. Supplemental Material: The online appendix is available at https://doi.org/10.1287/orsc.2022.17026 .

Impartiality and fair play revisited

Impartiality and fair play revisited

A framework for assessing municipal high-growth high-technology entrepreneurship policy

This paper advances a framework for making rudimentary need, impact, and cost–benefit assessments of municipal high-growth high-tech entrepreneurship policy. The framework views ecosystem support organizations like accelerators , incubators, and hubs as components in a city’s venture pipeline. A component’s pipeline size, raise rate, and cost per raise measure its performance. In total, the framework consists of eight objective and reproducible measures based on quantities and qualities of venture capital investment and 16 definitions of related terms-of-the-art. These measures and definitions are illustrated in 26 real-world policy examples, which assess initiatives in Houston and St. Louis over the last 20 years. The examples reveal an enormous variation in welfare effects, and some policies appear welfare destroying. Many non-profit organizations claim success (and win awards and acclaim) using non-standard measures despite performing at less than half benchmark levels. Policy cartels , which control startup policy in many U.S. cities, also engage in non-market actions to protect their rents. • Inductive approach to find ‘best’ standardized framework for city startup policy. • Venture pipelines have sizes, raise rates, and costs per raise. • Economics of startup initiatives rooted in information problems and scarce expertise. • Policy cartels control startup policy and engage in non-market actions. • Enormous variation in policy effects and some startup policies may destroy welfare.

Activism for Whom? The Role of CEO Narcissism on Firm Engagement in Socially Contentious Issues

Research has extensively documented how executives’ personality traits, experience, and personal values shape firm behaviors and outcomes. Narcissism in Chief Executive Officers (CEOs) has been convincingly associated with pursuing risky market strategies but has not been explored in regard to influencing a firm’s nonmarket strategies. We investigate narcissistic CEOs’ involvement with contentious sociopolitical issues (SPIs) to understand whether they also engage in risky nonmarket actions. Drawing from the wider constructs on narcissism in personality psychology research, we argue narcissistic CEOs steer firms toward risky nonmarket actions due to: insensitivity to risks, search for attention, and the need to expose socially desirable identities. Testing for interactions with celebrity status and the degree of national public opposition to the SPI also reflect the likelihood that such involvement is driven strongly by selfish motives. We tested our theoretical model examining firms’ support to the same-sex marriage from 2004-2015 with a random sample of 209 S&P 500 firms. We found support for our model showing that narcissistic CEOs were more likely to engage in SPI, and both low celebrity status and high degree of public opposition strengthen this involvement.

Politics, rumors and identity: how does a domestic firm challenge an MNE in the non-market environment amidst home–host political hostility?

PurposePrior studies of competitive dynamics in emerging economies restricted their attention to how the multinational enterprise (MNE) initiates actions against the domestic firm in the market environment with no regard for the home-host relations. By contrast, this study aims to investigate how the domestic firm challenges the MNE in the non-market environment when there is home–host political hostility.Design/methodology/approachThe authors conducted a case study of non-market rivalry between an MNE from the Taiwan region and a domestic firm on the Chinese mainland in the period 2004–2008.FindingsRiding the home–host political hostility, the domestic firm mounted political tactics against the MNE on two fronts. It lobbied the government for identity-targeted policy changes, which demanded state-funded clients buy only from domestic suppliers. It also unethically spread identity-targeted political rumors to vilify the MNE in the local society. The MNE defended itself against the unfavorable policy by engaging in identity work of restructuring its distribution channels to conceal its “foreign” (non-domestic) identity. To fight off the rumors, it built a corporate citizen identity by identity work of aligning corporate social responsibility and research and development with local policy priorities.Originality/valueThe authors broaden the concept of competitive aggressiveness to include non-market actions, particularly unethical ones targeting a rival’s identity. The authors contribute to identity work scholarship by pinpointing an unrecognized phenomenon – high-effort identity work, used by the MNE as a defensive response. The emergent findings develop a moral perspective on non-market rivalry.

Nonmarket Strategy: Paths and Prisms

Objective: our study verifies the panorama of scientific publications on nonmarket strategy (NMS) in the management area. We analyze the theoretical perspectives, nonmarket actions, and empirical contexts of the publications. Method: the research includes 10 databases, which resulted in 19,685 papers. We used alignment, duplication, and qualification filters, leaving 144 studies from the best journals in the world, according to the Academic Journal Guide (ABS). Results: we observed the predominance of a single theoretical perspective per publication; there were few that applied more than one theory concomitantly. These publications explore different nonmarket actions, such as lobbying, political donations, advocacy, and philanthropy, with 58% considering the context of developed countries, 26% of emerging countries, and 16% depicting more than one country with different levels of development. Conclusions: we perceive inconsistencies between recurrent calls in the field and empirical studies carried out, highlighting the lack of interaction of market strategies and NMSs and exploration of the relationships between corporate political activity (CPA) and corporate social responsibility (CSR). Thus, we contribute to the understanding of the evolution of NMS, through the description of the schematic model of previous research and understanding of theories, actions, and contexts studied.

Campaign contributions and new technology investment in the broadband industry

We study how nonmarket actions taken by firms to shape the regulatory environment may impact their strategic market behavior. Studies have shown that corporate political activities (CPAs) can affect policy outcomes and firm value, but their influence on market actions remains underexplored. We propose that firm donations to politicians are associated with reduced investment in new technology infrastructure resources. We also argue that the size of the local market mitigates this effect while the positive local political environment intensifies the negative relationship. Our findings elucidate how firms implement their integrated strategies with both market and nonmarket actions and the important role that the nested nature of the larger political environment and local-level heterogeneity plays in shaping those strategies.

Everyone must help: performance implications of CEO and top management team human capital and corporate political activity

PurposeWhile research has shown that multiple actors, both internal and external to the organization, influence performance, oftentimes, these actors are studied in isolation. This paper aims to examine the performance implications of both top management team (TMT) and chief executive officer (CEO) human capital. In addition, the authors consider external actors' influence on performance by examining corporate political activity (CPA).Design/methodology/approachThe authors use a sample of National Collegiate Athletic Association (NCAA) football teams, examining human capital data on the head coaches and the assistant coaches, combined with the schools' participation in NCAA football committees.FindingsThe study findings indicate that organizations engage in various market and nonmarket strategies in concert, and that different strategies result in performance outcome differences. Specifically, we examine how the use of CEO and TMT human capital and CPA interact and influence performance.Practical implicationsThe authors examine the moderating effects of political activity on the human capital–performance relationship for both top leaders and TMTs. Organizations benefit from investing in the human capital of their leaders internally and CPA externally.Originality/valueWhile organizations engage in market and nonmarket actions in concert, management research has generally studied these concepts in isolation. This paper suggests that both market and nonmarket activities can influence performance.

Political animosity in cross-border acquisitions: EMNCs’ market and nonmarket strategy in a developed market

PurposeMany multinational corporations that originate from emerging economies (emerging market multinational corporations (EMNCs)) opt for acquiring a target firm in a developed market to expediently upgrade their strategic capabilities. To successfully achieve their strategic goals in the developed markets, EMNCs may use market actions and nonmarket actions to mitigate the potential risk derived from the national political differences between their home emerging economy and host developed economy. This paper aims to extend the legitimacy-based view of political risk to study the influence of political animosity – defined as misalignment of the host-home countries’ national interests – on the EMNCs’ market and nonmarket strategy in a developed market.Design/methodology/approachIn this paper, we examine all EMNCs that made cross-border acquisitions of the USA targets from 2005 to 2011. The final sample consists of 252 acquisitions originating from 25 emerging markets. This paper used Tobit regression analysis to test the direct and moderating hypotheses.FindingsFacing a high level of political animosity between their home country and the host developed economy, EMNCs use a market strategy by acquiring less ownership stake in the developed market, as well as engage in a nonmarket strategy by increasing lobbying activities. In addition, because of the heightened legitimacy concerns of developed market shareholders, cross-listed EMNCs have a greater tendency than non-cross-listed EMNCs to improve their legitimacy through their market and nonmarket strategy.Originality/valueThe current paper sheds light on EMNCs’ international strategy in developed markets by examining both market and nonmarket actions. EMNCs are shown to be strongly motivated to engage in acquisitions in developed markets so they can acquire invaluable strategic resources, such as brands and distribution channels, to compete with the developed market multinationals. A sophisticated ownership strategy and corporate political activities are invaluable for EMNCs to catch up with developed market multinationals.

Nonmarket Strategies of New Entrants and Incumbents: Evidence from Ridesharing and Taxi Firms

Technological innovations by digital platform-based firms have led to public debates about the legitimacy of new entrants’ business strategies in a range of industries, prompting governments to revisit industry regulations – and triggering competition between new entrants and incumbents in the nonmarket environment in order to shape the future “rules of the game”. In this paper, we examine the lobbying strategies employed by market incumbents and new entrants to shape emerging industry regulations. Our central thesis is that the asymmetry in political resources and capabilities of incumbents and new entrants will result in them pursuing divergent lobbying strategies. Focusing on the key legislator attributes of committee assignment, seniority, and ideology, we hypothesize that incumbents will leverage their superior political experience and relationships to lobby members of industry-relevant committees and more senior legislators. On the other hand, new entrants circumvent the resulting political barriers to entry by focusing on legislators outside of the committee, those who have more recently been elected, and those who are relatively more pro-competition. We also argue that the response of firms to their rivals’ lobbying will be contingent on the nature of their political support, and as such, incumbents and new entrants will respond differently to the lobbying actions of their rivals. Utilizing a novel dataset of lobbying contacts made by incumbent taxi firms and new entrant Uber with legislators in Toronto from 2014 - 2016 we find support for our hypotheses. Our findings emphasize how heterogeneous political resources drive nonmarket actions of firms when they compete with each other to influence policy outcomes.

We Fly Congress: Market Actions as Corporate Political Activity in the U.S. Airline Industry

The literature on corporate political activity (CPA) generally views nonmarket actions aimed at influencing political actors (e.g., lobbying or campaign contributions) as related but separate activities from market actions. This study demonstrates how firms’ core market actions (e.g., market entry or geographic expansion) can function as CPA. We theorize two mechanisms through which firms leverage market actions as CPA—“pork” and “perk.” We document these mechanisms through an empirical analysis of data from the U.S. airline industry in 1990-2019. Specifically, we find that airlines increase the supply of flights from airports in the home district of the Chair of the Transportation Committee in the U.S. House of Representatives (pork). In addition, such an increase in flight supplies is negatively associated with formal policy changes in Congress. We also find that the airlines increase the supply of flights to Washington, D.C. from the home district of the Speaker of the House and the home state of the Senate Majority Leader (perk). We contribute to the literature on CPA by demonstrating a blurred boundary between market and nonmarket actions, which may help explain firms’ competitive actions that cannot be explained by market considerations alone.

"GAS WARS" OF THE RUSSIAN FEDERATION AND UKRAINE IN 2006 AND 2009: VISIONS OF UKRAINIAN SOCIAL AND POLITICAL OPINION

The article is specifically concerned with the visions of Ukrainian socio-political opinion on the gas wars of 2006 and 2009 that had emerged between the Russian Federation (RF) and Ukraine. The author investigated the approaches of representatives of the political, media, expert circles to provide an overview of this issue, as well as the results of sociological monitoring, which generally reflect the estimates of the average population. It has been argued that starting with a seemingly purely economic proposal to raise gas prices for Ukraine to a market level, Russia actually had a political goal - to punish Kyiv for delaying negotiations on the creation of a consortium with the Russians for the development of the Ukrainian gas transportation system and the pro-European course launched by the «orange team» and to discredit the Ukrainian side as a transit country to attract the attention of Europeans to several Russian gas pipeline construction projects to bypass Ukraine, which would become an alternative or even a replacement for the Ukrainian one. The results of the study suggest that, although the gas wars of 2006 and 2009 demonstrated the readiness of the Russian Federation to use its energy resources to achieve geopolitical aims, in Ukraine, this crisis was partly considered in the context of internal political struggle. Despite the judgment of Russia's non-market actions and the beginning of diversification of the Ukrainian energy system, mostly public discussion was unfolded around criticism, foremost, of the Ukrainian authorities, whose ineffective efforts, they say, were used by Russian Federation. Paradoxically, even the average population was to blame for the fuel crisis, if not exclusively official Kyiv, then both sides, rarely - only Russia. Keywords: "gas wars" 2006 and 2009, Ukrainian socio-political thought, Russian Federation, Ukraine.

It's Not Just a Visit: Receiving Government Officials’ Visits and Firm Performance in China

ABSTRACTDrawing upon signaling theory, we propose that a specific form of non-market action, receiving government officials’ visits, reduces transaction costs between firms and their potential exchange partners and thus contributes to firms’ competitive advantage in China. We also contend that severity of information asymmetry and availability of alternative ways of reducing transaction costs moderate the relationship between receiving government officials’ visits and company financial performance in opposite directions. The former factor increases the ex ante value of receiving government officials’ visits and strengthens its positive impact on financial performance, while the latter factor decreases the ex post value of receiving government officials’ visits and reduces its positive impact. Our conceptual framework is supported by analyses that draw on a sample of listed manufacturing firms in China. Our study contributes to a more in-depth understanding of non-market actions in emerging economies, their contingencies, and their performance implications.

Beyond Nonmarket Strategy: Market Actions As Corporate Political Activity

Many firms attempt to manage their legal and regulatory environments by influencing policy makers. Typically, researchers have focused on how firms use nonmarket actions, including lobbying, campaign contributions, and related activities, to gain policy influence. We argue that firms may also attempt to change the effects of policies through market actions. Market actions may lead to both formal policy change (i.e., transformations of codified rules) and interpretive policy change (i.e., transformations of the effects of rules without changes in their codified form). We identify two pathways by which firms’ market actions may produce interpretive policy change: implementation and innovation. Implementation-driven change occurs when firms’ interpretations of incomplete laws alter and clarify the meaning of those laws. Innovation-driven change occurs when firms engage in novel activities that are difficult to interpret within existing regulatory frameworks and, thus, alter the effects of those regulations. ...

Integrating nonmarket and market action, response, and initiating firm performance in competitive dynamics

Purpose– The purpose of this paper is to seek to advance the understanding of competitive interaction framework based on competitive dynamics theory that investigates how nonmarket and market factors concurrently affect the relationships among action and response, their integration, and initiating firm performance.Design/methodology/approach– To test the hypotheses for this study, the authors used data collected from the news found in web sites of 72 Chinese firms over a five-year period from January 2007 to December 2011. The authors use the approach suggested by Baron and Kenny (1986) to test the mediated effect of rival response and speed, after structured content analysis is adopted to overcome the challenges of identification and measurement by using a sample of competitive actions and responses.Findings– The results test partial mediating role of rival response and speed in linking nonmarket, market, and integrated action with initiating firm performance outcomes. Rival responses and speed may vary systematically in nonmarket action. The relationship between the integration of competitive action and initiating firm performance is positive, high, and significant.Research limitations/implications– The results of this study were limited by a sample in China. The authors further need to consider how nonmarket and market components are operationalized in different institutional environments. The authors study only captures observable moves reported in the news of Chinese firms’ web sites. This single-data source collection raises the specter of cognitive bias. It is advised to collect data from multiple sources, perhaps directly measuring the managers’ perception by using a questionnaire-based survey.Practical implications– Firms whose main focus is to launch market actions in an effort to gain competitive advantage should ensure that their nonmarket actions constitute interfirm rivalry. Particularly, this study also encourages managers to continuously and rapidly integrate nonmarket actions into their analyses of market competition for firm success. Additionally, managers need to develop effective information-processing mechanisms to analyze, monitor, forecast, and interpret rival response and speed for each competitor.Originality/value– The research contributes to the authors’ understanding of the nature of nonmarket and market competition by bridging nonmarket action into traditional competitive dynamics.

Knowledge Networks for Sustainable Agriculture in England

The agricultural knowledge and information system (AKIS) in England has become more fragmented since the late 1980s. Its market orientation came just at the time of an increased need for non-market advice, particularly on the environment. Results from 11 face-to-face interviews and a workshop with a range of industry representatives suggest that this disjuncture and the unregulated nature of the AKIS have been frustrating for many in the agricultural community. These results support the literature in suggesting that sustainable agriculture (SA) has no consensual definition, but there is agreement that it requires a blend of market and non-market actions. Knowledge on SA is developing via retailers and consumers as well as farmers themselves, often through networks and co-learning, stimulated by regulatory requirements and grant information as well as profitability. There is much innovation in learning about SA within the AKIS, but its uptake is likely to be most strongly influenced by policy signals that provide incentives to farmers to farm more sustainably – for example, through the axes of the Rural Development Programme for England (RDPE) and a clearer justification as to why sustainable principles in agriculture make sound business sense for farmers.

Tribunal Specialization and Institutional Targeting in Patent Enforcement

Recent scholarship on nonmarket strategies has sought to understand organizational decisions to target specific institutional venues for nonmarket actions. We contribute to this emerging literature by studying institutional targeting between specialized and general-purpose tribunals, which are available to resolve disputes in a number of settings. Whereas prior work on institutional targeting has primarily focused on the differences in the policy preferences of public actors and the susceptibility of policy positions to influence activities, we focus on the differences in expertise and procedural flexibility that typically accompany tribunal specialization. We develop a theory about targeting decisions (forum shopping) in such contexts, which suggests two main drivers of tribunal targeting—expected settlement and expected returns. Drawing on these mechanisms, we formulate hypotheses linking tribunal targeting decisions to firm-level attributes such as (market) strategic stakes, institutional distance from competitors, and tribunal-specific capabilities. Our hypotheses are tested using a novel data set of patent enforcement against U.S. imports, which also sheds light on nonmarket strategies in patents.

Corporate governance and lobbying strategies

The paper extends the recent research on corporate non-market actions (Fernández & Usero, 2010, and Usero & Fernández, 2009). Specifically, we study whether corporate governance, in terms of managerial entrenchment, determines the choice and degree of lobbying engagements as a non-market strategy and with what impact on firm value. The results indicate that firms with more entrenched management have a greater tendency to engage in lobbying activities. Within the group of firms that lobby, there is a negative relation between the degree to which management is entrenched and lobbying intensity. In addition, there is a positive relation between lobbying intensity and value added by lobbying firms. Overall, the evidence suggests that corporate lobbying is not agency driven and may, in fact, create value.

Tribunal Specialization and Institutional Targeting in Patent Enforcement

Recent scholarship on nonmarket strategies has sought to understand organizational decisions to target specific institutional venues for nonmarket actions. We contribute to this emerging literature by examining institutional targeting between specialized and general-purpose tribunals, which has not been studied in prior work. We develop a theory about targeting decisions in such contexts, and formulate hypotheses linking these decisions to firm-level attributes such as (market) strategic stakes, tribunal-specific capabilities, and institutional distance from competitors. Our hypotheses are tested with a novel dataset of patent enforcement against U.S. imports, which also sheds light on nonmarket strategies in patents.

Research on non-market actions: A commentary essay

This commentary is about the article, “First come, first served: how market and non-market actions influence pioneer market share” (Usero and Fernández, 2009). Though non-market actions are common competitive weapons in practice, relevant studies are surprisingly rare in strategic research. The empirical results of Usero and Fernández demonstrate that in some specific contexts, traditional market actions do not affect market position, but non-market actions do. However, to erode first mover's advantage, this study considers only the relative frequency of actions and does not measure quality, timing and strength of actions. This commentary also discusses some practical and theoretical implications of Usero and Fernández's study.