Nonmarket Strategy Research Articles

Small firms’ non-market strategies in response to dysfunctional institutional settings of emerging markets

Institutional settings in emerging markets are often plagued by state actors exploiting the vulnerability of resource-constrained small and medium sized enterprises (SMEs). Whilst we know a great deal about how large firms use non-market strategies (NMS) to navigate such institutional spaces, current knowledge of such strategies in connection with SMEs remains limited. Using in-depth interview data from a wide range of actors in Russia, we reveal the predatory behavior of state actors and how, in response, SMEs develop NMS to respond to fluctuating institutional conditions. We underline four forms of institutional predatory behaviors comprising shifting the rules of the game; privatizing power; selectively using/abusing laws; and normalizing informalities. In turn, we identify how SMEs variously adopt NMS to tackle these predatory strategies; namely deflection, alliance, concealment and internationalization. We highlight how SMEs learn to navigate, and ultimately to overcome, dysfunctional and fragile institutional conditions of emerging markets through the pursuit of particular NMS.

Do Returnee Executives Value Corporate Philanthropy? Evidence from China.

While past studies have enriched our understanding of the impact of returnee executives on firm market strategy and outcomes, we know relatively little about the relationship between returnee executives and firm nonmarket strategies. Grounded in upper echelons theory, this study explores the relationship between returnee executives and corporate philanthropy, the latter of which is an important nonmarket strategy in emerging economies such as China. Using data on publicly listed Chinese companies from 2010 to 2017, we find that the proportion of returnee executives is negative related to corporate philanthropy. We also find that this negative relationship is strengthened by executive ownership, but weakened by corporate prominence and political connections. Our study makes important theoretical contributions to strategic leadership research, upper echelons theory, and the literature of corporate philanthropy. The managerial implications are also discussed.

The Combinations of Market and Non-Market Strategies That Facilitate Family Firm Survival

Abstract Even though family firms are characterized by an overlap between the family and business systems, family business research has focused separately on how family firms compete (i. e., strategic behavior) and how families are involved their firms (i. e., types of family orientation). With the aim of closing this research gap, we draw on the heterogeneity principle of family firms and the equifinality principle of the configurative approach to conjecture that family firms can successfully adjust their strategic behavior and family business orientation in a variety of ways to enhance their likelihood of survival. We follow a sample of Spanish family firms over an 11-year period (2004–2015) to test our model. Based on the Kaplan–Meier survival estimator and the Cox proportional hazard model, we find that survival likelihood is higher when firms combine a differentiation strategy with a business-first or a family-enterprise-first orientation or when firms follow a low-cost strategy with a family-first orientation.

Corporate Responses to COVID-19: A Nonmarket Strategy Approach

The COVID-19 pandemic has been an unprecedented threat to the survival of U.S. firms. Prior studies show that firms use market strategies such as layoffs and pay cuts to cope with organizational crises. Little is known about how firms engage in corporate social responsibility (CSR) and corporate political activities (CPA) during crises. This study focuses on how America’s largest publicly traded firms use these two nonmarket strategies to cope with the COVID-19 pandemic. Results suggest that public firms actively engaged in both CSR and CPA after the outbreak. The preliminary estimation shows that firms listed in Russell 1000 have donated or pledged over $3.9 billion to corporate philanthropy and invested over 2.1 billion in observed political donations and lobbying in Congress in the early pandemic. The marked variation in corporate nonmarket strategies could be partially attributed to corporate elites’ political ideology, political accountability, and perceived COVID-19 risk.

Is Chain Affiliation a Strategic Asset or Constraint in Emerging Economies? Competitive Strategies and Performance in the Russian Hotel Industry

The purpose of the paper is to find out how chain affiliation, an important strategic choice and a key determinant for hotel performance, influences the strategy-performance nexus in the emerging economy context. It combines the resource- and institution-based views to investigate how chain affiliation moderates the relationship between competitive strategy and performance. This is done by distinguishing between market-based strategies based on differentiation or cost leadership, and non-market strategies that manifest in institutional advantage. The empirical analysis draws from original survey data on 162 hotels located in the Russian cities Moscow and St. Petersburg. The paper finds that first, in emerging economies the competitive edge of chain-affiliated hotels largely arises from market-based advantage, but only in terms of cost advantage. The finding that differentiation advantage is not an important factor of performance for chain-affiliated hotels suggests that firm-level resources derived from chain affiliation would not transform into competitive advantage in the emerging economy context. Second, it is found that institutional advantage is more important determinant of performance for independent hotels, demonstrating the importance of local knowledge and relationships for firms in emerging economies. This finding also suggests that chain affiliation might be rather a strategic constraint than asset for creating superior performance via institutional advantages in the emerging economy context.

Digital markets, competition regimes and models of capitalism: A comparative institutional analysis of European and US responses to Google

The comparative capitalism literature examined how institutions vary on a national or societal level and how these differences affect multinational companies’ strategies. Yet, little attention has been devoted to cross-national or regional differences in the governance of competition, especially in the context of digitalization of markets. The article seeks to fill this gap by looking at the case of Google. It traces the process of the stark US–EU disagreement over Google’s abuse of dominant position in digital markets, which resulted in one of the largest fines in the EU history. It is argued that the variation in the response to the company’s market and nonmarket strategies are traced back to differences between Ordoliberal and Chicago School ideas, which are embedded in the ‘competition regimes’ of European and US capitalist models. The article concludes by discussing the implications of these findings for varieties of capitalism frameworks.

Strategic Risk and Lobbying: Investigating Lobbying Breadth as Risk Management

Despite many studies investigating how lobbying expenditures enhance performance outcomes, limited attention has been given to understanding the underlying mechanisms driving firm lobbying behaviors—and, particularly, where firms target their lobbying expenditures. We argue lobbying breadth serves as a risk management strategy to both hedge against possible government intrusion and minimize disapproval of firm actions from government officials. As such, we posit firms’ strategic risk will positively relate to breadth of lobbying firms’ target. Further, if lobbying breadth serves as risk management strategy, then other aspects that affect decisions about the amount of risk protection a firm may need should also affect this relationship. We argue that CEOs’ ownership and firms’ political uncertainty may exacerbate exposure from firm risk taking to government actions, thus strengthening the insurance relationship. Similarly, we argue available slack, as a form of internal insurance against government actions, will weaken the relationship between strategic risk taking and lobbying breadth. We find support for most of our arguments in a sample of U. S. manufacturing firms. This research extends understanding of lobbying beyond the predominant focus on expenditures and securing beneficial outcomes. Exploring how lobbying breadth serves an important risk management role also offers insights into firm nonmarket strategy.

The contingent value of managerial ties for new ventures during China’s anti-corruption campaign

ABSTRACT The tie-based non-market strategy has been widely adopted by new ventures to gain a competitive advantage in China. However, the recent anti-corruption campaign may have profound influences on business practices, particularly on the utilization or leveraging of managerial ties for improving firm performance. This study explored the critically important but fairly underexplored research question of whether managerial ties continue to create value for new ventures under China’s anti-corruption campaign. Based on a sample of Chinese listed firms consisting of new ventures, this study found that business ties and political ties have produced divergent effects on the performance of new ventures since China’s anti-corruption campaign took effect. Moreover, a wider coverage or scope of anti-corruption increased the benefits of business ties and political ties, while a higher intensity of anti-corruption facilitated the role of anti-corruption scope on increasing the benefits of managerial ties for better performance of new ventures.

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.

Taking advantage of institutional weakness? Political stability and foreign subsidiary survival in primary industries

PurposeThis paper aims to investigate the extent to which locating primary industry subsidiaries in politically unstable countries impacts their survival. The authors argue that foreign multinational enterprises in less stable political environments can shape policies that are impactful on the costs of operating in primary industries and avoid compliance with more stringent policies at home.Design/methodology/approachUsing a sample of 753 primary sector investments of Japanese multinational enterprises during the period 1986 to 2013, the authors conduct a parametric survival analysis of the relationship between political stability and subsidiary survival.FindingsPolitical instability has a slight, curvilinear relationship with subsidiary survival, such that both high and low stability are associated with lower exit hazard, while moderate levels of stability increased exit hazard. This nonlinear relationship is stronger for efficiency-seeking subsidiaries, and weaker for market-seeking subsidiaries.Originality/valueThis research contributes to the debate around the pros and cons of globalization by examining the extent to which firms benefit by offshoring primary sector investments to avoid more costly legal requirements at home. The results suggest that this non-market strategy should be mitigated through appropriate policy measures and provides evidence that those policies already implemented are effective.

Magalu Has It: Social, Political, and Market Strategies during COVID-19

ABSTRACT This teaching case presents the strategic positioning of the Magazine Luiza group (Magalu), represented by the director of institutional relations José Ribeiro and Luiza Helena Trajano, chairman of the Board of Directors, before and during COVID-19. The case’s objective is to promote a reflection on the business strategies adopted in times of crisis. Since the beginning of the COVID-19 pandemic in Brazil, Luiza and Magalu have engaged in discussions and practiced a series of strategic actions for the benefit of the group’s employees, small- and medium-sized companies, and those most affected by the pandemic. A few months after the first case, the instability was still perceived, it was still present, the number of infected and deaths rose and little was known about when the daily life would return to ‘normal.’ Many questions persisted about Magalu’s next steps. Thus, it was necessary to discuss how the group should position itself to ensure performance and reputation. The proposal is to make students put themselves in the place of José Ribeiro, director of institutional relations and the urgent affairs commission of Magalu, in order to encourage a debate about the market and non-market strategies that could be implemented.

Magalu Has It: Social, Political, and Market Strategies during COVID-19

ABSTRACT This teaching case presents the strategic positioning of the Magazine Luiza group (Magalu), represented by the director of institutional relations José Ribeiro and Luiza Helena Trajano, chairman of the Board of Directors, before and during COVID-19. The case’s objective is to promote a reflection on the business strategies adopted in times of crisis. Since the beginning of the COVID-19 pandemic in Brazil, Luiza and Magalu have engaged in discussions and practiced a series of strategic actions for the benefit of the group’s employees, small- and medium-sized companies, and those most affected by the pandemic. A few months after the first case, the instability was still perceived, it was still present, the number of infected and deaths rose and little was known about when the daily life would return to ‘normal.’ Many questions persisted about Magalu’s next steps. Thus, it was necessary to discuss how the group should position itself to ensure performance and reputation. The proposal is to make students put themselves in the place of José Ribeiro, director of institutional relations and the urgent affairs commission of Magalu, in order to encourage a debate about the market and non-market strategies that could be implemented.

Egalitarianism and Lobbying: The Effect of Home-Country Culture on Cross-Border Nonmarket Strategy

Egalitarianism and Lobbying: The Effect of Home-Country Culture on Cross-Border Nonmarket Strategy

Politically Active Firms and Innovation Decisions: A Legitimacy Based View

Corporate political activities (CPA) of a firm have long been viewed as a means of gaining legitimacy which help the firm to access to unique and vital resources. Although researchers have thus far widely examined the antecedents and the outcomes of CPA, top management teams (TMT) are less attention by CPA scholarship, not to mention the behavioral side of managerial perception is also relevant to their tendency to invest accessible resources on innovation. This paper aims to explore the innovation effect of CPA-active firms in their legitimacy-building process as a strategic response to institutional expectation. We attempt to make inquiries into why do CPA-active firms which are embedded agents, choose to innovate themselves and develop propositions upon if managerial perception affects the ways they bear the risk of innovation. Building upon the institutional theory and prospect theory, this paper suggests that firms with higher levels of CPA generate better innovation performance through their unique acquire rare and valuable resources, and are more aware, open and motivated to satisfy the institutional expectations. Further, we also propose that top management team factors will moderate the relationship between CPA and innovation. In the face of a sure-loss context, the top management team increases the propensity of risk-taking, which enhances the innovation effect of CPA intensity. Meanwhile, when the top management team is faced with a sure-gain context, it reduces the managerial propensity for risk-taking, which negatively moderates the innovation effect of CPA intensity. The study contributes to the corporate political activities literature and strategy research by bridging non-market strategy and market-favored outcomes and integrating institutional perspective and the behavioral logic for a more complete view of firm innovativeness than either theory alone.

Padrinhos e caciques: o lado sombrio da atividade política corporativa na captura do Estado

Uma das estratégias de não-mercado é a atividade política corporativa (CPA), aa qual engloba as atividades empresariais relacionadas a esfera pública como o lobby, as doações de campanha, as associações de classe e contratos públicos. A conexão entre esfera pública e privada pode trazer alguns benefícios, mas também traz riscos para o ambiente democrático na medida em que pode ensejar uma captura do Estado por parte do setor privado, dando para este acesso ao poder público. Sendo assim, este artigo define o lado sombrio da atividade política corporativa e como ele leva à captura do Estado por meio de estratégias empresariais como a de Caciques e Padrinhos. Para tanto, realiza-se um estudo de caso único e intrínseco, utilizando os dados públicos disponibilizados pelas colaborações premiadas da investigação da Odebrecht na operação Lava Jato. Os dados foram estudados de forma qualitativa por meio da análise de redes temáticas. Esta metodologia permite que se construa teoria a partir de uma descrição rica do caso, o que abre portas para novas pesquisas sobre as possíveis consequências negativas da CPA. Como contribuição, traz-se o lado sombrio da CPA e como o relacionamento pessoal entre Caciques e Padrinhos, incentivados pelas organizações, pode levar a crimes organizacionais e à captura do Estado.

A configurational approach to explain non-market strategies in emerging economies

A configurational approach to explain non-market strategies in emerging economies

Nonmarket Strategies across Complex Institutional Contexts

Managers face nonmarket pressures that increasingly challenge the way they run their firms. These challenges often require managers to get savvy in nonmarket strategy. While nonmarket strategy can be relevant for all firms, it is particularly relevant for multinational enterprise subsidiaries, because they operate in countries that differ from their multinational enterprise’s home country and are thus subject to the liability of foreignness. In my dissertation research, I was aiming to better understand the incentives and drivers behind firms’ nonmarket strategies.

Does size matter? Non-market social and political engagement by accounting firms in the #Brexit discourse on Twitter

ABSTRACT Social media is widely used by accounting firms to achieve a variety of business objectives and is a key enabler of non-market strategies. Socio-political involvement (SPI) involves firms taking positions on issues that lack societal consensus, have low information rationality, evolving viewpoints and issue salience, with no clear performance outcomes for firms. SPI may result in firms alienating stakeholders with opposing views, resulting in no or adverse performance outcomes. Accounting firms traditionally may not engage with such issues due to the associated reputational risk. Further, research suggests firm size is one of the most prominent firm-level antecedents of socio-political engagement. As the empirical context for this paper, we choose the Brexit referendum, a significant historical but divisive event with contested social norms. This paper explores the engagement of accounting firms on Twitter with the #Brexit discourse from the referendum announcement to one month after the vote. The objectives of the study are to understand the nature of non-market socio-political engagement by accounting firms in the #Brexit discourse on Twitter, and explore the differences between accounting firms of different size in this context. Our findings suggest that accounting firms engaged in the #Brexit Twitter discourse through a variety of non-market socio-political engagement activities, and that smaller firms tended to engage more than larger firms, most likely reflecting the ideological inclination of firm management. The engagement of accounting firms in socio-political discourse extends our understanding of how accounting firms of all sizes use social media and supports critical accounting and institutional perspectives.

The Implications of COVID‐19 for Nonmarket Strategy Research

Abstract The COVID-19 virus ignited social and economic turmoil around the world Not since the Spanish Flu of 1918 had we seen a pandemic of such scale and severity The resultant global transformation of industries, supply chains, work, communication, and institutional frameworks suggests we are entering a period of non-ergodic change, in which the future cannot be extrapolated from the past (North, 1999) This means that we do not know the probability distribution or the outcomes from the virus So, we must find a way to coexist and build our resilience