Nonmarket Strategy Research Articles

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

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.

Do Female CEOs Promote Behavioral Consistency in Firm’s Nonmarket Strategy?

In this study, we explore whether and under what conditions female CEOs engage in behavioral consistency in promoting CSR practices. Specifically, we draw on social role and behavioral consistency theories to argue that female CEO presence will be positively related to CSR consistency. We use two categories to capture the firm’s consistency in CSR practices: inter-domain and temporal consistency. Temporal consistency refers to the consistency of a firm’s behavior towards its stakeholders over time. Inter-domain consistency indicates reliability in a firm’s conduct across its various stakeholder groups. We also argue that the relationship between female CEOs and CSR temporal and inter-domain consistency will be moderated by the board gender diversity. Data from 161 unique firms within the S&P 500 over the 2005-2013 sample period provide support for each of our hypotheses. Keywords: female CEOs, board gender diversity, nonmarket strategies, corporate social responsibility, behavioral consistency

Firms’ Market and Non-market Strategies in Response to the Climate Crisis

The purpose of this panel symposium is to engage a group of expert panelists in a moderated, interactive discussion of (1) the impact of the climate crisis on market strategies such as location choice, M&A, and product innovation; (2) the impact of the climate crisis on non- market strategies such as political actions and sustainable business practices; (3) the implications for the broader business environment and policy; and (4) the measurement and disclosure of firms’ climate risk exposure and impact.

Synergy or Antagonism? How Corporate Political and Social Strategies Influence Firm Innovation

Although the increasing research interest on non-market strategy, the relationship between non-market strategy and firm innovation as well as the combinative impact of engagement in CPA and CSR are not well researched or understood. In this study, we integrate institutional perspective and multi-stakeholder perspective to analyze how the CPA and CSR independently and interdependently affect a firm’s innovation performance. With 3938 firm-year observations of China’s A-shared listed private firms between 2014 and 2018, we find support for the predictions that CPA strategy and CSR strategy both can exert a positive effect on firm innovation performance. We further develop competing hypotheses for the interactive effect of CPA and CSR on firm innovation from synergistic versus antagonistic view, and the findings are consistent with the antagonistic view. This study not only enriches our knowledge regarding the independent and joint influence of non-market strategies on firm innovation performance, but also highlights the necessary to pay attention to the heterogeneity of non-market stakeholders when integrating non-market political and social strategies.

What’s in a Name? CEO Foreignness and Government Inspections of MNCs

Government inspections, such as workplace compliance with local tax or safety regulations, are ubiquitous and represent a significant proportion of time that managers of multinational firms spend on interacting with government stakeholders in host markets. Disadvantaged by the information asymmetry about firms’ non-compliance with regulations, how do boundedly rational inspectors select inspection targets? Drawing on the theory of social judgments, we propose that inspectors treat CEO foreignness, that is, whether a CEO of a firm is local or foreign, as a marker of potential organizational non-compliance with local institutional demands, therefore, prompting them to select MNC subsidiaries with foreign CEOs for inspections more often. We further explore four boundary conditions, which we argue weaken the association between CEO foreignness and the perception of potential non-compliance. We test our hypotheses on a sample of 2,259 foreign subsidiaries that operated in Russia between 2015 and 2018 and find evidence supporting most of the hypotheses. Our primary contribution is to the liability of foreignness research, specifically, the mechanisms underpinning the discrimination hazard, as well as MNCs’ subnational location in host markets and nonmarket strategy.

IGOs and the Impact of Institutional and Economic Integration on CSR Performance

Intergovernmental organizations (IGOs), such as the European Union, coalesce divergent member countries toward cooperative political, social, environmental, and economic activities to promote the betterment of communities and societies. The level of integration of member countries in the IGO is thereby expected to shape the level of betterment. To understand this connection, we study the impact of institutional and economic integration of IGO member countries on the Corporate Social Responsibility performances of its firms. Building on insights from political science, nonmarket strategy, and institutional theory as well as an empirical analysis of the EU, we find that low levels of institutional integration of IGO member countries reduce CSR performances of their firms. We also find that high levels of economic integration enhance CSR performances and that this high economic integration also moderates the negative impact of low levels of institutional integration on the CSR performances of firms. We contribute to institutional theory and societal sustainability concerns, by connecting the supranational, national, and firm-level.

Social License to Operate: Developing Stronger Social Activities at Home

Non-market strategy is an area under current exploration in international business. Several studies focused on the political side of this theory, highlighting how important political connections can be for international expansion of emerging market multinationals (EMNEs). However, the social side is still requiring more attention, especially the role of philanthropy and the partnership with the third sector such as NGOs. In this study, we argue that multinational firms that had previously engaged with social activities will present a better performance in the short-term. We claim that social initiatives can be understood as a firm-specific advantage for EMNEs and it can help firms to overcome country-specific disadvantages from their home countries. Therefore, firms that developed familiarity with policymakers and social activities can be less affected by the institutional uncertainty than firms without such experience. In order to test our assumptions, we investigated Brazilian multinationals under the covid-19 pandemic crisis through panel data by analyzing 3,790 social initiatives. Our findings showed that social initiatives at home can lead to better performance, specially pressured by foreign investors.

The Effect of Nonmarket Strategies on Reputation in the Eyes of Experts: Uncovering Microfoundations

Corporate political activity (CPA) and corporate social responsibility (CSR) are two nonmarket strategies that have been argued to jointly affect firm reputation. But little is known about the impact of CPA on reputation, the microfoundations of this relationship, and the interplay with CSR. Building on the social judgment literature, we propose that perceptions of warmth and competence explain how nonmarket activities – here, CSR, controversies, and CPA – are evaluated by experts. We performed two experiments and a QCA-study of large US firms to test how nonmarket activities, in isolation and combination, affect firm reputation. We find that CPA reduces warmth and increases competence perceptions and has an overall negative effect on reputation. In the presence of other nonmarket activities, however, the effect of CPA is only marginal while CSR is a strong driver of reputation. In addition, we show that CSR can cushion firm reputation against the reputational costs of controversies.

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.

Interplays of Political Ties and Social Evaluation of Emerging Market Multinational Corporations

In this paper, we address the question of how interplays of home country political ties and target nation political ties might shape social evaluation of EMMNCs with different ownership structures. We conduct a comparative case study of four overseas acquisitions made by two EMMNCs (one SOE and one POE) from China during 2014–2017 in a strategic (port) industry. The port investments include China Merchant Group’s (CMG) Hambantota Port, Sri Lanka, and Port of Newcastle, Australia) and Landbridge Group (LBG)’s Port of Darwin, Australia, and Colon Container Port, Panama). The research result shows a relationship between interplays of political ties across home and target nations and levels of public disapproval faced by EMMNCs. This study makes three contributions. First, it extends the political embeddedness perspective by developing propositions about the relationships of political ties’ interplays and public disapproval levels. In particular, the case data reveals that target nation ties play a stronger role than home country ties in influencing public disapproval of EMMNCs. Second, it enriches the perspective by providing an argument for the sociopolitical liabilities (i.e., generating concerns across domestic and international levels) of political ties, depending on the strength of such ties to the home country and to a target nation. Third, it adds to literature on nonmarket strategy by highlighting the sociopolitical liabilities of CPA conducted by leveraging partnerships with governments or intergovernmental relationships. We outline future research directions and implications for EMMNC managers.

The Role of Intergovernmental Relations in Shaping Outward foreign Direct Investment from China

Prior research on outward foreign direct investment (OFDI) has emphasized the role of factors such as market size and institutional quality in enhancing investment to a destination. However, the literature has not adequately considered how intergovernmental relations influence the decision to invest in a country. In this article, we explore the role of intergovernmental relations in Chinese OFDI decisions in the context of the “Belt and Road Initiative (BRI)”. We use emerging research on institutional and global political economy theories to address this prominent issue by examining Chinese OFDI to twelve countries. Based upon our qualitative analysis, we find that better intergovernmental relations reduce the negative impact resulting from competing institutional logics, enhance agglomeration economies and increase Chinese OFDI to different industries in a host country. This study contributes to the literature on the role of politics and non-market strategies in the internationalization of emerging market multinationals through amelioration of the institutional framework and global political economy perspectives.

Nonmarket Strategy Integration: How Corporate Social Responsibility Becomes a Political Strategy

Using social exchange theory, this paper explores how CSR is used as a political strategy. The findings reveal that when CSR is politicized, it involves the design and implementation of politically charged CSR initiatives that entail firm-polity negotiated exchanges. Firms exchange social interventions for political influence in ways that allow politicians take the credit to boost their re-election. To do this, the choice of target politician hinges on political vulnerability, the selection of CSR initiatives is based on CSR orientation and CSR benefit personalization, the location of CSR is linked to politicians’ electoral constituencies, and the timing of CSR is affected by election cycles. Overall, this paper provides new insights into how CSR is used in indirect social exchanges in political markets, shows that CSR can be CPA, and thus extends nonmarket strategy integration from its focus on CSR’s complementarity with CPA to its instrumentality in CPA. The findings have important theoretical and practical implications.

Self-Regulation with Conflicting Stakeholders

We study self-regulation, a non-market strategy firms use to reduce pressure from activists, in the context of the payment transparency movement in extractive industries. This movement seeks to reduce corruption by promoting disclosure of oil companies’ payments to host governments but often generates a tension between activists that desire transparency and host governments that oppose it. We show that firms are more likely to join the Extractive Industries Transparency Initiative (EITI), a multi-stakeholder initiative promoting transparency, if they invest in countries where conflict between activists and governments is less intense and if they have stronger bargaining power. We find that when legislatures mandated transparency, EITI-member firms became more competitive. We also find local perceptions of corruption fell in areas close to EITI-member firms’ operations.

Impact of “Distance” on Corporate Social Responsibility: Evidence from an Emerging Market

Multinational enterprises resort to several market and nonmarket strategies to overcome the liability of foreignness (LOF) faced by them in overseas markets. A lesser explored nonmarket strategy to overcome LOF and gain legitimacy in the host country is through corporate social responsibility (CSR) expenditure. This paper empirically examines the role of “distance” on the CSR practices of foreign subsidiaries in India. Further, the study explores the role of market potential of the emerging market host country as proxied by the Gross Domestic Product in moderating the relation between distance variables and CSR expenditure. Our sample consists of CSR expenditure data of 69 foreign subsidiaries in India from 17 countries over the period from 2014 until 2018. The results show that cultural and economic distances impact the CSR expenditure of foreign subsidiaries positively and significantly. This relationship is negative and significant for administrative distance and insignificant for the case of geographic distance. Furthermore, it is observed that the market potential of the host country can make the foreign subsidiaries overlook the existence of distances.

Killing Two Birds with One Stone in the Nonmarket Environment: The Orchestration of Corporate Social Responsibility as a Political Strategy

AbstractThis paper explores how corporate social responsibility (CSR) is used as a political strategy. Drawing on social exchange theory and using data from firms operating in Ghana, the findings reveal that when CSR is politicized, it involves the design and implementation of politically charged CSR initiatives that entail firm–polity negotiated exchanges. Firms exchange social interventions for political influence in ways that allow politicians to take the credit to boost their re‐election. To do this, the choice of target politician hinges on political vulnerability, the selection of CSR initiatives is based on CSR orientation and CSR benefit personalization, the location of CSR is linked to politicians’ electoral constituencies and the timing of CSR is affected by election cycles. Overall, this paper provides new insights into how CSR is used in indirect social exchanges in political markets, shows that CSR can be CPA and thus extends nonmarket strategy integration from its focus on CSR's complementarity with CPA to its instrumentality in CPA. The findings have important theoretical and practical implications.

Consumers’ reaction to automobile recalls: The role of corporate non-market strategies and interstate relations

We investigate how the two signals of non-market strategies of foreign automakers (i.e. the domestic share of ownership and recognition of social responsibility) and the relations between China and the foreign automaker’s home country (i.e. interstate relations) jointly affect the business performance of Sino-foreign joint venture automakers (SJVAMs) when an automobile recall event occurs. Analysing 422 automobile recall events in 2013–2019 befalling SJVAMs in China, we find that the domestic share of ownership and recognition of social responsibility can buffer the negative impact of recalls on SJVAMs’ business performance. Meanwhile, the buffering effect of recognition of social responsibility is stronger when the domestic share of ownership is lower. Additionally, the buffering effects of domestic share of ownership and recognition of social responsibility are stronger when the interstate relation is poorer. We discuss our contributions to research on corporate legitimacy and crisis management.

Donation or Advertising? The Role of Market and Non-market Strategies in Corporate Legitimacy.

Although existing research has discussed the impact of market strategy or non-market strategy on corporate legitimacy thoroughly, there is limited research on the joint role of the two strategies. Based on the big data analysis of media coverage, this study addresses this research gap by using a sample of Chinese listed firms during 1999–2018. Our finding reveals that positive media coverage promotes corporate financial performance, and advertising intensity and corporate donation strengthen this relationship. However, the simultaneous application of market and non-market strategies diminishes the effect of both strategies on the expansion of corporate legitimacy. This study extends the literature on the impact of corporate strategies on corporate legitimacy by highlighting the joint role of the corporate market and non-market strategies.

Digital technology-based entrepreneurial pursuit of the marginalised communities

United Nations' Sustainable Development Goals call for an inclusive development and empowerment of marginalised communities. However, scholars have suggested that one single discipline or party, Multinational Enterprises, Governments or NGOs, cannot tackle these issues alone. Parallel to this, nonmarket strategies emphasising the societal context of economic competition have appeared as an important topic of research. Taking an inter-disciplinary perspective, this paper examines the extant research in digital technology, entrepreneurship and development studies to identify whether these three fields can help us understand how these issues can be tackled from a nonmarket strategies' approach and propose a conceptual model. We analyse papers published from 1994 to 2018 in these fields to map the collective state of research and provide a conceptual framework. We believe that this will help in establishing a relationship between digital technology, entrepreneurship and inclusive development. It will also help us to understand how to transform the benefits of technology into jobs and income for marginalised communities. This study will encourage researchers to investigate how United Nations' Sustainable Development Goals (SDGs) can be achieved. • Can Sustainable Development Goals (SDGs) be achieved? • Developing a framework to study the pursuit of entrepreneurship activities of marginalised communities • The impact of digital technology on inclusive development • Interdisciplinary systematic literature review

The interface of market and nonmarket strategies: Political ties and strategic competitive actions

We focus on corporate political connections as a critical nonmarket strategy and propose that political ties can facilitate firms’ strategic competitive actions but may also hurt the outcomes of such actions, depending on whether the ties are associated to central versus local political actors. Studying China's television manufacturers at the onset of deregulation and globalization, we find that central and local political ties have contrasting effects on firms’ competitive actions and their performance outcomes. To further shed light on theoretical mechanisms, we examine the impact of China's WTO accession on firm actions and contrast domestic-based and internationalization competitive actions.

Does family matter? Ownership, motives and firms’ environmental strategy

Extant research has primarily focused on the economic drivers and outcomes of corporate environmental performance. This trajectory oversimplifies the motives for environmental strategies across all firm types and particularly overlooks how firm ownership presents other motives for environmental strategies. In this study, we leverage institutional theory to examine how family motives, underpinned by family members' desire to gain or preserve family legitimacy and socio-emotional wealth, affect ISO 14001 certification. Using firm-level data, we find that family ownership has a positive effect on ISO 14001 certification. This effect is stronger for firms whose names include the family name and also for firms located closer to large cities. Our study contributes to nonmarket strategy literature by showing that family motives underpin firms’ environmental initiatives. It also contributes to institutional theory by delineating the levels of legitimacy that spur nonmarket strategy in family firms.