Nonmarket Strategy Research Articles

New lessons from biology for economics and business: a systems approach to non-market environments.

Drawing on recent advances in biology, this paper describes a systems approach, 'Systems Public Affairs' (SPA), to integrate non-market strategies in corporate purposes and strategies. Just as the environment of organisms affects and is affected by their development and evolution, so individuals and businesses adjust to and can shape their non-market environment, which we define as 'a historically formed national and social sphere, including laws, regulations, and policies, which supports, maintains and restrains the operation and preservation of markets'. The paper uses cases from South Korea to illustrate this approach. Emergent ideas in biology have great relevance for micro-foundations of business. Traditionally, economic activities are outcomes of individualistic decision-makers, each promoting their distinct objectives within economic markets. In the SPA approach, decision makers in the domains of business, policy and civil society collaborate in shaping non-market environments to align business objectives with public interest. This requires agency to rise to higher levels than that of businesses, policymakers and civil society through collaboration and experimentation in the presence of stochasticity and radical uncertainty. Analogous to the advancement of organism evolution through emergence of nervous systems and learning, so alignment of organizations with their non-market environments accelerates economic and social development.

Waves or ripples: African countries risk shocks and the survival of Chinese exports to Africa

This paper examines the impact of risk shocks in Africa on the stability of Chinese firms' export relationships by analyzing risk fluctuations and using survival analysis to measure their effect. The findings reveal that risk shocks significantly increase the survival risk of Chinese firms' export relationships, leading to a notable reduction in stability. Private and non-foreign firms are more vulnerable to these risks, but certain market strategies such as learning-by-doing, learning from neighboring firms, and waiting strategies can effectively mitigate their adverse effects on export stability. Our findings indicate that certain market strategies, such as learning-by-doing, learning from neighboring firms, and waiting strategies, can effectively mitigate the adverse effects of risk shocks on export stability. Interestingly, a nonlinear marginal effect is observed in the case of the waiting-timing strategy. However, adopting a multi-destination strategy tends to worsen the negative impact of risk shocks on export stability, especially for private firms. Furthermore, non-market strategies employed by firms that promote government diplomatic behavior help reduce this negative impact.

Caught in the Crossfire: Anti-Corporate Activism and Non-Market Strategies of Corporate Targets in the Creation of Emissions Controls

The paper explores a unique phenomenon in the context of the strategic interaction of activists and their corporate targets. We explore a unique phenomenon - how less targeted firms leverage activists-focal firm rivalry in the context of instituting emission controls in Japan. We find that less targeted firms employ social value-based strategies against market rivals by capitalizing on the opportunity structure created by the conflicts between activists and their primary targets in non-market environments.We contribute to the literature by developing a more fine-grained argument on how dynamic interactions between multiple players (activists, primary targets, and non-targets) can lead to a different path for movement activists to achieve their goals. We also draw attention to the proactive strategic actions taken by non-target firms when their market rivals are under attack by social activists. We add to the previous arguments by revealing social value-based strategies that can serve as an alternative for corporate targets to exert influence on non-market environments.

Sameness and/or Otherness: What Matters More for Narcissist CEOs in the Context of Non-market Strategy?

Sameness and/or Otherness: What Matters More for Narcissist CEOs in the Context of Non-market Strategy?

The determinants of MNE foreign subsidiaries’ performance: a systematic literature review and future research agenda

PurposeForeign subsidiaries of multinational enterprises (MNEs) operate in complex and competitive international environments, implement market and non-market strategies, manage resources and value-added activities and contribute to the overall performance of their parent firms. Thus, the research question on the determinants of MNE foreign subsidiaries’ performance is of interest to managers and academic researchers. The empirical literature has flourished over the recent decades; however, the domains are fragmented, and the findings are inclusive. The purpose of this study is to systematically review, analyse and synthesize the empirical articles in this area, identify research gaps and suggest a future research agenda.Design/methodology/approachThis study uses the qualitative content analysis method in reviewing and analysing 150 articles published in 24 scholarly journals during the period 2000–2023.FindingsThe literature uses a variety of theoretical perspectives to examine the key determinants of subsidiary performance which can be grouped into six major domains, namely, home- and host country-level factors; distance between home and host countries; the characteristics of parent firms and of subsidiaries; and governance mechanisms (the establishment modes and ownership strategy, subsidiary autonomy and the use of home country expatriates for transferring knowledge from the headquarters and controlling foreign subsidiaries). A range of objective and subjective indicators are used to measure subsidiary performance. Yet, the research shows a lack of broader integration of theories and presents inconsistent theoretical predictions, inconclusive empirical findings and estimation bias, which hinder our understanding of how the determinants independently and jointly shape the performance of foreign subsidiaries.Originality/valueThis study provides a comprehensive, nuanced and systematic review that synthesizes and clarifies the determinants of subsidiary performance, offers deeper insights from both theoretical, methodological and empirical aspects and proposes some promising avenues for future research directions.

The moderating effects of national cultural practices on the relationship between international diversification strategies and corporate environmental responsibility disclosures

This study examines the relationships between an important market strategy (international diversification) and corporate environmental responsibility disclosure (CERD), a nonmarket strategy. We rely on institutional theory and the stakeholder perspective and hypothesize a positive relationship between international diversification and CERD. We also hypothesize a direct effect of performance-based cultural practices (PBC) and socially supportive cultural practices (SSC), derived from the GLOBE culture database on CERD and its moderating effect on the international diversification – CERD link. The sample includes 335 large Multinational enterprises (MNEs) from 31 countries then distributed among three corporate social responsibility (CSR) regimes: European, Anglo-Saxon, and Asian and emerging markets. The results show support for the hypothesized relationships between international diversification strategies and CERD and that the direction of the relationship varies by region of the world. We find significant support for the moderating role of national cultural practices on the international diversification-environmental disclosure links.

Nonmarket Strategies and Firms’ Internationalization: Evidence from Sub-Saharan Africa-MENA Regions

Nonmarket Strategies and Firms’ Internationalization: Evidence from Sub-Saharan Africa-MENA Regions

Navigating Geopolitical Tensions: MNEs’ Market and Nonmarket Strategies

Navigating Geopolitical Tensions: MNEs’ Market and Nonmarket Strategies

Towards an Integrated Perspective: Synergies and Trade-Offs in the Repertoire of Nonmarket Strategy

Towards an Integrated Perspective: Synergies and Trade-Offs in the Repertoire of Nonmarket Strategy

ESG as a Nonmarket Strategy to Cope with Interstate Tension

ESG as a Nonmarket Strategy to Cope with Interstate Tension

Exploring Contextualized Nonmarket Strategies to Manage Geopolitical Risk and ESG

Exploring Contextualized Nonmarket Strategies to Manage Geopolitical Risk and ESG

How Does Government Information Access Interplay with Resources of Emerging Market Small and Medium-Sized Enterprises for Innovation? Evidence from Vietnam

This study integrates the (extended) resource-based view (ERBV/RBV) and non-market strategy (i.e., corporate political activity) to investigate the role of internal and external resources as drivers of innovation in small and medium-sized enterprises in emerging markets (ESMEs). Using primary data from 192 Vietnam SMEs collected between 2014 and 2016, we adopted a partial least square estimation to examine our hypotheses, supplemented by ordinary least square and unobserved heterogeneity tests for robustness. Our PLS-SEM results reveal that firms with intangible resources, from human capital investment to political connections, are more likely to innovate. While the positive effect of human capital investment on innovation is not moderated by government information access, the impact of political connections as an extended resource is significantly enhanced by access to government information. On the other hand, international export experience is not related to innovation by itself, but it is positively moderated by government information access, suggesting that engaging in international markets alone is insufficient. This study contributes to the emerging market literature by examining the effects of intangible resources and political connections on ESMEs’ innovation and highlighting the role of government information as a non-market strategy access in enhancing these relationships.

Orientation towards environmental sustainability in European family versus nonfamily firms: the role of policymaker engagement and incentives

ABSTRACT This study contributes to the debate on family business environmental sustainability by investigating the environmental orientation of family versus nonfamily firms. We study whether family business status affects (i) the extent of environmental orientation, i.e. the number of incentives set for environmental sustainability activities, contingent upon firms’ engagement with policymakers, and (ii) how firms’ environmental orientation unfolds, considering the types and beneficiaries of the incentives. To do so, we build on behavioural theories in family business, along with the literature on firm non-market strategies and responses to institutional pressure. Data on 162 European manufacturing firms from the Carbon Disclosure Project and the Orbis database are collected. Our results show that family firms have a higher degree of environmental orientation than nonfamily firms. However, when they engage with policymakers, the family firm–environmental orientation relationship weakens. Regarding the types and beneficiaries of the incentives, family firms are more likely to provide monetary incentives and to be more inclusive in their incentive systems than nonfamily firms are.

Board gender diversity, nonmarket strategy and firm performance: Evidence from emerging markets MNCs

Firms operating in foreign markets often engage in nonmarket activity for various benefits, such as gaining legitimacy, reducing uncertainty and enhancing performance. This is particularly true for emerging markets multinationals corporations (EMNCs) in advanced countries, as they commonly experience liabilities and challenges due to their origin. Leveraging institutional theory, we conceptualize board gender diversity as a nonmarket strategy, and investigate its impact on the performance of EMNCs. Using data from a sample of Chinese and Indian foreign subsidiaries, we find that board gender diversity improves performance. This effect is stronger for firms having public relations functions and also for firms operating in foreign countries with high institutional gender parity. These findings, besides significantly adding to the literature, have practical and managerial implications.

Buffering the adverse effects of social nonmarket strategy on corporate financial performance

Purpose Firms are advocating for social change to a growing extent, but the performance implications of corporate activism are not clearly understood. This study aims to introduce social nonmarket strategy (SNMS) as a goal-directed form of corporate activism, explore whether such strategy harms corporate financial performance (CFP), and assess the buffering potential of effective market-based strategy and good standing with stakeholders. Design/methodology/approach A reflective measurement model and all hypothesized relationships were tested using consistent partial least squares structural equation modeling on a data set of 202 US-based small, medium, and large manufacturing and service firms. Findings SNMS is positively related to good standing with stakeholders but negatively related to CFP. By contrast, a higher market strategy (MS) is positively associated with both stakeholder performance and CFP. MS and stakeholder performance buffer but do not fully neutralize the adverse financial effect of SNMS. Practical implications Firms undertaking SNMS face serious risks. However, effective MS and higher levels of stakeholder performance can buffer but not fully neutralize the adverse financial effect of SNMS. Originality/value This research introduces SNMS as a goal-directed form of corporate activism, establishes the conflicting performance effects of such strategy and estimates the buffering potential of MS and stakeholder performance.

Rethinking institutional arbitrage: De jure exposure and de facto enforcement

AbstractResearch SummaryThis article disentangles the de jure and de facto dimensions of institutional distances to examine their impact on firms embedded across heterogeneous jurisdictions. I argue that significant transaction costs occur only when the de facto implementations of regulations from both home and foreign jurisdictions become irreconcilable. Using an original dataset of the enforcement actions of the US Foreign Corrupt Practices Act (FCPA), I find that institutional arbitrage becomes infeasible for non‐US‐based firms with de jure exposure to the FCPA when the de facto judicial constraints over bureaucratic discretion are weak in these firms' home countries targeted by FCPA enforcement. De facto FCPA enforcement makes such US‐listed firms more likely to divest from their home markets or voluntarily delist from US stock markets.Managerial SummaryMangers should consider the divergence or convergence between the de jure and de facto dimensions of institutional distance in evaluating their international business strategies. In analyzing the operational obstacles for engaging in cross‐jurisdictional activities, notably institutional arbitrage schemes, managers should realize that such obstacles do not simply arise from contradictions in officially stipulated regulations, but also from whether and the extent to which such de jure contradictions are activated. Assessing the feasibility of corporate political activities and other legally ambiguous nonmarket strategies as risk‐mitigation measures thus needs to take into account this distinction. MNEs' global strategies should also recognize the increasingly intertwined national and supranational legal systems and their interactions as sources of operational risks.

Political embeddedness, socioemotional wealth, and R&D investment in family firms: Evidence from China as a transition economy

The behavioral agency model predicts that family firms underinvest in R&D to preserve socioemotional wealth. In transition economies, family firms suffer from institution voids, so political embeddedness helps them do business. In a mixed gamble analysis of publicly listed firms in China, we find that politically embedded family firms are more likely to invest in R&D than those that are not politically embedded. However, this effect is weaker when the firms are in more-competitive industries or regions with higher speed of pro-market reforms. Hence, in regions with higher pro-market reforms speed or in more-competitive industries of China, family firms should be aware that potential financial and SEW gains derived from R&D investment are less dependent on the government and that political embeddedness does not always confer advantages. Family firms need to be strategic in response to institutional changes when implementing nonmarket strategies.

Business Group’s Performance: Market and Non-Market Measures in Pakistan

This study examines the influence of market and non-market strategies on the financial performance of firms affiliated with business groups. The study analyzed 136 non-financial firms affiliated with business groups, listed on the Pakistan Stock Exchange for the period 2010 to 2020. Market strategies focused on firm related resources diversification, financial constraints and internal capital generation rate. Whereas, non-market strategies focused on political connections and corporate social responsibility. Using fixed effect panel regression model, we found that for business-group firms, both market and non-market strategies significantly increase financial performance. Diversification, financial constraints and internal capital generation drive market success, while political connections and strong corporate social responsibility contribute through non-market measures. This suggested that business group affiliated firms should carefully choose a mix of market and non-market resources for optimal performance. This is also suggested that regulatory authorities shall introduce such policies that smoothen the business operations and encourage managers of affiliated firms to employ more combinations of market and non-market resources to get competitive advantage and promote responsible business practices within the groups.

Inward FDI and local firms' political connections in emerging markets: Evidence from China

AbstractResearch SummaryResearch on the spillover effects of foreign direct investment (FDI) into emerging markets has primarily focused on local firms' productivity or innovation outcomes while overlooking their nonmarket strategies. Based on the resource dependence theory, we propose that inward FDI has a U‐shaped impact on local firms' political connections. This is because when FDI is at a low to medium level, its spillover benefits substitute for local firms' dependence on government resources. As FDI further increases, its competitive threats outweigh spillover benefits, driving local firms to a greater dependence on the government to neutralize the threats. This relationship is contingent on external and internal factors altering resource similarity between FDI and local government. Our analyses of Chinese listed firms support our predictions.Managerial SummaryThis study delves into how firms in emerging markets respond to inward FDI, particularly focusing on the role of political connections as a nonmarket strategy. Our findings offer valuable insights for both local firms and governments, providing a holistic view of the opportunities and challenges associated with inward FDI. We advise local firms to adopt a balanced approach by integrating both market and nonmarket strategies to maximize benefits, as relying solely on political connections may not be the most effective way to address the challenges posed by inward FDI. Additionally, our research emphasizes the importance of evaluating the resources provided by inward FDI against those provided by local governments, as the similarity of these resources alters the role of inward FDI as perceived by local firms.

Non-market strategies in weak institutional environments: The case of MNE subsidiaries in Cameroon

This study seeks to understand why and how multinational enterprise (MNE) subsidiaries use non-market strategies to establish legitimacy in weak institutional environments. By adopting an in-depth qualitative approach, we explore the non-market strategies enacted by four MNE subsidiaries operating in Cameroon. We find that MNE subsidiaries endeavour to gain legitimacy and social reputation in weak institutional environments by engaging with multiple local stakeholders through corporate social responsibility and political non-market strategies. Our findings support the previous studies on emerging African markets that the host-country government remains the most critical and challenging stakeholder. However, firms experience legitimacy risks due to their strong ties with the government during periods of political and social instability. The subsidiaries mesh social with political strategies and use them as complementary strategies for developing their social reputation and gaining social license to operate in the host market, thus mitigating social and political risks from aligning with the host government. We draw implications of these findings for research and practice.