Professor Tazeeb Rajwani FRSA

We examine how foreign-owned multinational enterprises (MNEs) respond to changing corruption practices in a sudden transition of political systems in one of the world’s largest emerging markets. We draw on the political science and corporate political activity literatures in explaining how local subsidiary firms (subsidiaries) of Western European MNEs adapted their political activities during the transformation of Indonesia’s political landscape from an autocratic regime to a democratic and decentralized system. Based on four case studies of political activities, we found that the political strategies of our subsidiaries changed in response to evolving power structures in an environment of arbitrary and pervasive corruption. Under Suharto’s regime (1967-1998) MNEs sought to avoid informal transaction costs by developing relations with his supporters. When Suharto fell MNEs began to conduct transitioning strategies by partnering with competitors, leveraging political networks, and outsourcing corrupt practices. Later, however, MNEs developed ethical political strategies by leveraging government partnerships, supporting national interests, and forming relationships with local communities. We theorize that corruption in times of political system change can be dynamic and evolving and that the nature of this corruption offers MNEs more agency than previously understood in managing corrupt demands in ethical ways.

Due to their direct and indirect network effects, platform firms play a significant role in the global economy. These firms have disrupted the innovation value chain by creating and capturing value from the scaling up of their business activities. Despite the role they play in disruptive innovation, we know relatively little about the ways in which platform firms engage with their institutional and other stakeholders through non-market corporate political activities and social strategies. This special issue on ‘non-market strategies and disruptive innovation in the platform economy’ aims to contribute to the current literature which has examined the rise of platform firms and their value creation. It also intends to capture drivers of value creation by drawing insights from the non-market strategies literature developed in the context of traditional firms. This introductory article and the papers included in this special issue provide important insights into non-market strategies and platform firms, and highlight potential topics suited for future research.

Organizations are increasingly turning to sustainable practices. A significant challenge in the endeavour to embrace sustainability relates to the trade-off between corporate greening and corporate growth – i.e., the difficult task of achieving growth while being truly sustainable. Through an in-depth study of Brunello Cucinelli, one of the world’s leading companies in the luxury fashion industry, we introduce the management philosophy of “gracious growth” to help organizations manage the green-growth trade-off and pursue substantial rather than symbolic sustainability. We offer actionable recommendations and present a process framework that organizations can adopt to implement “gracious growth”. Generating new insights about how growth and sustainability can be simultaneously achieved, this article provides ideas that can help managers enhance their organizations’ economic and environmental performance while also avoiding the legitimacy risks associated with greenwashing.

Purpose – Multinational corporations are increasingly augmenting their international strategies with insights on, and approaches to, external stakeholders and nonmarket dynamics. The rise of populism and increased geopolitical uncertainty have accelerated these efforts, particularly for business leaders anticipating and engaging external agents, events, and issues that challenge the strategic objectives of their enterprises. Approach – In this introduction to the special issue, we begin by explaining why the increased preponderance of populism and geopolitical uncertainty are simultaneously posing an existential threat to the post-Cold War global economy predicated on free trade and (relatively) open borders, and consequently, challenging the structures and strategies of international business. Findings – We provide an overview of the four papers in our special issue, and consider how each advances insights on how multinationals effectively navigate the nonmarket uncertainties of the contemporary global economy. We then advance four important areas for international business research around multinational nonmarket strategies: (i) resilience and legitimacy; (ii), diversification; (iii), market and nonmarket strategy integration; and (iv), institutional arbitrage. Research implications – We anticipate that nonmarket strategy scholars can build on these themes to assess how nonmarket strategies can better enable multinationals to survive and thrive in an age of heightened global risk and uncertainty.

Firms use environmental management standards such as ISO 14001 to reduce the impact of business activity on the natural environment. Though these standards are widely celebrated on moral and ethical grounds, their implication for financial performance and competitiveness is equivocal. Drawing on neo-institutional theory, we conceptualize ISO 14001 as a nonmarket strategy and examine its impact on firm performance within the contexts of three highly polluted emerging markets - China, India, and Pakistan. Employing a rigorous event-study approach, we find that ISO 14001 certification has a negative impact on firms' operating profitability and market value in both short and long runs. This negative impact appears to be stronger in contexts with weak institutions and poor environmental protection regimes. Further multivariate analyses show that the negative impact of ISO 14001 on firm performance is weaker among socially responsible firms and stronger among politically connected firms. These findings contribute to the environmental management literature. They also have practical implications for managers.

This study explores how political connections help firms promote innovation in emerging markets by facilitating the acquisition of required resources and knowledge and establishing collaborative relationships with external partners. Further, we emphasize that reconfiguration and acquisition of resources and knowledge are critical for firms to seize the opportunities by focusing on the role of human resource (HR) slack and state ownership in the innovation process. By specifying the HR slack based on the accumulated knowledge and experience of employees, we explain that the way firms integrate the resources and knowledge from political connections with an appropriate type of HR slack critically affects firm innovation. We also argue that state ownership strengthens the capabilities of politically connected firms to acquire resources and knowledge for firm innovation because political connections and state ownership enable firms to establish a dual pathway to access resources and knowledge. Based on data from 3,229 Chinese listed firms over a decade, our findings show the importance of highly-skilled HR slack to adequately allocate and absorb the resources and knowledge from political connections to foster firm innovation. The results also highlight the significance of state ownership in promoting innovation within politically connected firms.

In drawing from transaction cost economics and social network theories, this study examines the influence of corruption as a determinant of foreign subsidiary formal contracting practices with government-sponsored financial institutions. We hypothesize that lower corruption distance (between parent home and host countries) and higher perceived corruption (in host country) are positively related, and mutually reinforcing, when considering a foreign subsidiary's propensity to formally contract with government-sponsored financial institutions. We also suggest that these relationships strengthen with the intensification of political ties to government officials who can offer preferential political services via contractual agreements, changing the nature of market transactions in favour of a foreign subsidiary. We found support for our hypotheses using data from a sample of over 350 subsidiaries located in the Philippines and Thailand.

Drawing from the social capital theory, we theorize the importance of the information provisioning role of the top management team's (TMT's) social capital, commonly called guanxi, in the speed of due diligence in technology acquisitions. We argue that social capital derived through the TMT's interpersonal ties brings the advantages of trust, reliability, and speed of information, which can potentially expedite the task of evaluating target technology firms. In addition, we take the contingency view of social capital theory to build the case that contextual factors, including TMT tenure and equity control, can limit the efficacy of TMT social capital. We contribute to the literature by focusing on TMT's social capital, which is constitutive in entrepreneurial actions such as technology mergers and acquisitions. Using data from 616 Chinese technology acquisitions during 2006–2015, we find empirical support for our hypotheses.

How will variation in legal distance influence a foreign subsidiary's propensity to engage in entrepreneurially orientated initiatives within the context of an emerging market environment? We answer this question by combining elements of institutional theory to suggest that legal distance between a foreign subsidiary's parent home and host country, as well as managerial perceptions of deficiencies in the host country legal service sector, will influence EO initiatives. By analyzing 352 multinational enterprise foreign subsidiaries operating in the Philippines and Thailand our results indicate the complexity of these relationships in that there is a curvilinear (U-shaped) relationship concerning the legal distance between a foreign subsidiary's parent home and host country and its propensity to engage in EO initiatives. Our findings also suggest that this curvilinear relationship will strengthen as managerial perceptions of host country legal deficiencies increase, particularly when the parent possess an in-house legal affairs department. Following these insights, we discuss theoretical implications and future research opportunities.

Entrepreneurial intention plays a critical role in the economic growth and development of countries. As a result, an increasing number of studies have examined different antecedents of entrepreneurial intention to understand how to foster entrepreneurial intention in a country. This research focuses on macro-environmental-related factors and endeavors to provide a more comprehensive understanding of the critical factors in these areas that can impact entrepreneurial intention. A total of 40 studies from high-ranked journals were systematically identified and analyzed in the field of entrepreneurship and management. This review sheds light on details of the key cultural, regional, and economic factors as well as governmental and political factors and highlights how they impact entrepreneurial intention. It also provides some suggestions for future research directions. While some systematic literature review papers have been conducted on entrepreneurial intention and its antecedents, environmental factors have only been identified broadly as key antecedents. This research systematically reviews the existing papers and unravels different aspects of these factors and explains how they impact entrepreneurial intention. In addition, it sheds light on related future research directions.

In this study, we investigate the link between multinational enterprises’ (MNEs) dynamic capabilities (DC) and their environmental collaboration with suppliers mediated by entrepreneurial orientation (EO) and moderated by environmental complexity. Drawing on responses from 249 managers of MNEs in Türkiye, we find that DC improve environmental collaboration with suppliers. Moreover, we posit that through EO, MNEs achieves greater environmental collaboration with suppliers for effective environmental solutions, especially at a low level of environmental complexity. The results enrich the role of organizational capabilities in strengthening environmental collaboration with suppliers to achieve environmental sustainability, and provide suggestions for managers and policymakers to better understand capabilities for the purpose of attaining sustainability.

The late Kenneth Waltz, father of the neorealist approach to international relations, first suggested that a bipolar world is more stable,1 arguing that a world dominated by two great powers is less prone to large-scale conflict.2 The end of the Cold War heralded the dissolution of this system and the emergence of a unipolar world dominated by the United States. Susan Strange’s notion of structural power3 seemed to support this thesis, since, during the 1990s, the US had the authority to shape and determine the structure of the global political economy. This power manifests as the ability to control the four key pillars of the world economy: security, production, finance, and knowledge.

The impact of institutional environments on firms' strategic decisions has been examined in strategy and international business literature. Yet, the current state of knowledge about how institutional voids affect firms' resource commitment in emerging markets is equivocal. This paper reviews and develops an integrative framework that maps the key conceptualizations, theoretical frames, mechanisms, contingencies and outcomes in the institutional voids – resource commitment literature. Altogether, this paper structures institutional voids and resource commitment research into salient themes to help scholars scope the field and explore value-adding avenues to further our understanding of internationalization and resource commitment decisions in emerging markets.

The extant literature on comparative Corporate Social Responsibility (CSR) often assumes functioning and enabling institutional arrangements, such as strong government, market and civil society, as a necessary condition for responsible business practices. Setting aside this dominant assumption and drawing insights from a case study of Fidelity Bank, Nigeria, we explore why and how firms still pursue and enact responsible business practices in what could be described as challenging and non-enabling institutional contexts for CSR. Our findings suggest that responsible business practices in such contexts are often anchored on some CSR adaptive mechanisms. These mechanisms uniquely complement themselves and inform CSR strategies. The CSR adaptive mechanisms and strategies, in combination and in complementarity, then act as an institutional buffer (i.e. ‘institutional immunity’), which enables firms to successfully engage in responsible practices irrespective of their weak institutional settings. We leverage this understanding to contribute to CSR in developing economies, often characterised by challenging and non-enabling institutional contexts. The research, policy and practice implications are also discussed.

In this study, we draw upon insights from agency theory to examine the impact of managerial political ties on cost of debt and also to explore whether corporate governance mediates this impact. We hypothesize that political ties reduce financial reporting quality, disclosure of non-financial information and board independence, and are therefore associated with higher interest rates. We also hypothesize that the negative effect of political ties on the cost of debt will be stronger if firms borrow from privately-owned banks versus government-owned banks. Using data from Ghana, we find support for our direct and moderation hypotheses; political ties are associated with high interest rates and poor corporate governance. However, we do not find evidence of mediation. Altogether, the findings reveal the dark side of political connections and highlight the cost of political embeddedness in emerging credit markets.

Burgeoning complexity and variability in the political and social contexts in which multinational enterprises (MNE) operate has led to increased research on MNE nonmarket strategy. This focus is enhanced by ethical concerns about the nonmarket practices of big business, particularly in institutionally fragile or nascent market contexts. In this introduction to our special issue on the complexities and varieties of nonmarket strategy, we review the extant research on MNE nonmarket strategy, specifically on corporate political activity and corporate social responsibility. Our review suggests that to address the complexities related to nonmarket strategy in a changing and complex international context, corporate stewardship is inadequate and MNEs must adopt a more authentic and culturally embedded values-based nonmarket strategy, which may contribute to long-term advantage. Subsequently, we introduce and synthesize the papers in our special issue and present a research agenda for furthering scholarship on values-based nonmarket strategy.

It is commonplace for today’s transnational enterprises to undertake political risk analysis when choosing foreign markets and creating entry strategies. Despite this, non-market elements of corporate strategy are less well researched than the traditional market-based perspectives. Providing comprehensive and leading edge overviews of current scholarship, this Companion surveys the current state of the field and provides a basis for improving our understanding of the non-market environment, encouraging new insights to improve strategies for enhancing a firm’s performance and legitimacy. With a foreword by David Baron, the international team of contributors includes Jean-Philippe Bonardi, Bennet Zelner, and Jonathan Doh, who combine to create a book that is essential reading for students and researchers in business, management, and politics, including those interested in business regulation, environmental policy, political risk and corporate social responsibility.

We explain that the reasons for this Dialog stem from the enduring gaps in our understanding of what trade associations are, how they work, and what impact they have on members, industries, markets, and societies. The Dialog includes an opening paper by Thomas Lawton, Tazeeb Rajwani and Amy Minto and is followed by contributions from Michael Barnett, Steven Kahl, Lyn Spillman, and Howard Aldrich. Building on previous and ongoing research, each author reflected on the key questions driving this Dialogue: Do trade associations matter and if so, how? We argue that not only do they matter but more attention needs to be given to their roles and responsibilities.

This chapter considers the regulatory parameters of nonmarket strategy and reviews some of the key literatures that have addressed the nonmarket environment and nonmarket strategy, particularly from a theory of power perspective. To rationalize complexity and align nonmarket conditions more clearly with market objectives, several takeaways are advanced for business practitioners. First, for nonmarket purposes, it is useful to conceptually separate formulation (the strategy of vision, analysis, and configuration) from implementation (the policy of execution, delivery, and performance measurement). Secondly, all aspects of regulatory engagement and compliance can be understood through a nonmarket strategy lens, which thus rationalizes and reduces the complexity that companies encounter. Thirdly, market influence and competitive advantage can accrue to managers who understand power and influence, both structural and relational, and how to leverage it relative to other companies and nonmarket actors such as government agencies.

This chapter explores the power of information as a key determinant of which companies win—or lose—in the nonmarket environment. Typically, the essence of influencing nonmarket actors requires using high-quality information for and from different stakeholders. It advances the practical steps that managers can use in developing an information package to create value in the nonmarket. The nonmarket activity must ultimately harness this information to persuade legislators or citizens to align with the firm’s nonmarket position. There are several key learning points in this chapter for strategic managers and business leaders. Firstly, information packages need to be defined and delivered in relation to specific issues. Secondly, managers need to plan their information exchanges with sufficient attention to targeting, quality, frequency, resources, and relationships. Thirdly, managers who proactively configure their information delivery process enhance their chances of getting their messages across to key nonmarket stakeholders.

Purpose This paper aims to illustrate how legacy airlines can reorientate to achieve sharp recoveries in performance following prolonged periods of stagnation, decline and eroding competitiveness. Design/methodology/approach The authors use a qualitative analysis of five longitudinal case studies of legacy airlines that embarked on strategic change between 1997 and 2006. Data collection spanned ten years and included archival data, public documents, news clippings, accounts in specialist books and internal company documentation. Findings The paper identifies two distinct approaches for reorientation in the legacy airline industry. Companies that have fallen behind and are in risk of failure focus on regaining customer trust and loyalty, and restructuring route networks, business processes and costs in an “improvement and innovation” reorienting approach. Underperforming airlines, for whom growth has declined in traditional markets and who note that opportunities exist elsewhere, focus on product and service development and geographical growth in an “extension and expansion” reorienting approach. Practical implications The paper develops a framework for successful reorientation in the legacy airline industry. This framework encourages executives to focus on and leverage profit maximization, quality, leadership, alliance networks, regional consolidation and staff development during periods of strategy formulation and reorientation. Originality/value This research addresses the dearth of understanding and attention afforded to the concept of reorientation in the literature on strategic turnaround. The research also serves to emphasize the presence and importance of reorientation as a strategy of change within the legacy airline industry. Furthermore, in demonstrating how this strategy can be implemented in a sharp‐bending or performance improvement context, this study illustrates how reorientation is intertwined with the broader turnaround process.

Socio‐political issues and environments are becoming more complex and challenging. In this introduction to the special issue on ‘The Management of Socio‐Political Issues and Environments: Organizational and Strategic Perspectives’, we take stock of the burgeoning research on how firms interact with socio‐political actors and environments over the last few decades, specifically research on Corporate Political Activity and Corporate Social Responsibility. We then argue that the socio‐political environments and actors with which firms interact are in a state of flux, such that issues are more interrelated and dynamic, and actors are more diverse and demanding. As such, we propose a new concept of corporate socio‐political engagement (CSPE), which represents a more holistic perspective to understanding complex interactions among firms and their social/political stakeholders, incorporating and transcending conventional notions and tactics documented in the extant nonmarket strategy literature. Using a two‐dimensional framework that captures the identity of socio‐political actor or the nature of socio‐political issues (political, social, or both) as well as the relevant level of analysis at which the interactions unfold, we showcase the contributions of the special issue articles to this research agenda. Finally, we discuss and specify future research directions for revealing the multifaceted nature of CSPE.

Takes a strategic management approach to a company's engagement with political, regulatory and social arenas and interests Develops a conceptual framework and managerial process for designing and delivering successful nonmarket strategies Compares and synthesizes nonmarket strategy best practices in a variety of company and country contexts. Advances an argument and logic for aligning nonmarket and market strategies to deliver competitive advantage Argues that regulatory and responsibility departments in companies should be functionally integrated and managerially elevated to ensure that the nonmarket environment is engaged at a strategic level in business organizations

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. Moreover, although pandemics cause short‐term fear and disruption, they can also initiate long‐term change for economies and societies. Thus, we suggest that although COVID‐19 challenges the foundations of modern business and management, it reinforces the core assumptions of nonmarket strategy research. In particular – and especially during times of crisis and uncertainty – competitive advantage is predicated on proactive political and social awareness and engagement, aligned with strategic business objectives.

There is a widely held view that the performance of firms depends not only on the ability of managers to exploit economic markets but also on their ability to succeed in political markets. To test the value of political activism, recent scholarship has probed the impact of corporate political activity (CPA) on firm performance. However, mixed findings and the fragmented nature of the field raise more questions than answers as to the nature of this relationship. This systematic review examines scholarly articles for evidence of the impact of CPA on firm value. The findings suggest that CPA is more valuable in emerging countries and that relational CPA strategies are more common in emerging (versus developed) countries where social capital underlies political and economic exchange. We also document the paucity of research on informational CPA strategies and policy outcomes in the emerging country context. We consider the implications of these findings and others for local and multinational enterprises, and offer suggestions for further research. © 2014.

Chapter 6 draws on organization design literature to inform questions and decisions about the organizational architecture for advancing different nonmarket strategies and suggests that firms with diverse strategic orientations (for instance, low cost or differentiation) may justifiably pursue different approaches. It starts by looking at the managerial function of external affairs and where it sits in an organization. It then describes how newer issues in the nonmarket environment—notably the increasing pressure on firms to engage in corporate social responsibility and sustainability activities—have broadened and changed the structural approach to nonmarket strategy. Finally, it explores the development of internal structures for nonmarket strategy and managerial responsibility for successful political and social strategy, synthesizing the overall discussion to propose an optimal managerial structure and policy and communications functions.

Turbulence has become a constant, with an oxymoronic ‘predictable unpredictability’ nature. What does this mean for enterprising, visionary chief executive officers (CEOs)? Turbulent industries presage that CEOs need to react ever faster and more creatively to take opportunity of the risk to which their competitors are exposed. The Aer Lingus case demonstrates that the need for effective, path creating leadership in corporations has never been greater. The airline’s needs enabled the expansion of its leadership capacity by developing opportunistic vision, versatility and connectivity. Leaders can start to embrace turbulence and release value by moving along the cost-service continuum as a process to improve productivity and regain market momentum.

We advance research on the antecedents of business model design by integrating institutional and imitation theories to explore how the business model of new ventures evolves in a weak institutional environment. Based on a case study of Jumia—an online retailing company in Africa established with the aim to emulate the success of Amazon.com—we propose a process model entitled “imitate-but-modify” that explains how business models evolve through four distinct phases (i.e., clarification, legitimacy, localization, and consolidation). In essence, this model explains how new ventures surrounded by considerable uncertainty deliberately seek to learn vicariously by imitating the business model template of successful firms. However, because of significant institutional voids, the ventures’ intentional imitation is progressively replaced by experiential learning that blends business model imitation with innovation.

This paper reviews the extant literature on the exploration/exploitation dilemma. Based on a systematic analysis of structural, behavioural, systemic and temporal solutions, the authors are able to show that the learning literature continues to struggle with the question of how exactly an organization can separate exploration and exploitation and at the same time enable necessary knowledge exchange and cooperation between these two notions. Paying closer attention to networks might enable future research to answer this question. In particular, a combination of structural aspects of networks and social ties has the potential to explain how the solutions currently on offer can be implemented successfully, how organizations can combine several of them, and how they can shift between them.

This chapter engages with the origins of strategic alignment by examining historical examples of nonmarket strategy and the business leaders who executed it. It also reflects on contrasting philosophical perspectives about the role of business in society and develops the book’s philosophy, seeking to avoid the normative attitude and approach often found in other writing on nonmarket strategy or its subthemes. Instead of advocating that managers and firms do the right thing, it endeavors to identify how they can do things right. It shows, first, that many of the principles and practices of nonmarket strategy today are post-Enlightenment in origin and that much can be learned from business history and past cases of entrepreneurial philanthropy. Secondly, managers should do what is in their best interest and in accordance with their business strategies. Thirdly, managers should use organizational capital sparingly and strategically to advance nonmarket causes that also benefit their enterprises.

Nonmarket strategy is now well established as a legitimate field of research. In this paper, we review the dominant paradigms in contemporary nonmarket research and report on the key insights and findings from those perspectives. We use this review to suggest that the integration of institutional and strategic perspectives provides a logical path for the continued development of nonmarket strategy research going forward. Looking ahead, our premise is that institutional perspectives will have an increased relevance to nonmarket scholarship, particularly with the increasing importance of emergent economies to international business. As companies are required to invest more in nonmarket practices, and adapt those practices to unique country contexts, we anticipate that research will increasingly draw from multiple conceptual paradigms and perspectives.

This paper examines the role played by strategic agility and gender diversity in enabling the creation of value for grand challenges (VCGCs) by small and medium-sized enterprises originating from emerging markets (ESMEs). ESMEs face significant challenges due to the dynamic environments in which they operate and the limited support they receive from formal institutions. In such contexts, strategic agility enables ESMEs to drive VCGCs through responsible collaborative innovation. We further argue that gender diversity is an important boundary condition that influences the effect of strategic agility on VCGCs via responsible collaborative innovation. Utilizing 228 survey responses from ESMEs originating from the United Arab Emirates (UAE), our findings shed light on the vital role played by strategic agility in enhancing ESMEs’ VCGCs. Specifically, our findings indicate that responsible collaborative innovation acts as an important mediating mechanism between strategic agility and VCGCs. In addition, gender diversity emerges as an important moderating factor in that, in the presence of more heterogeneous senior management teams, the effect of strategic agility on VCGCs through the mediating mechanism of responsible collaborative innovation is higher. These findings contribute to the literature on dynamic capabilities, upper echelons, and grand challenges by providing important insights into the mechanisms and boundary conditions of VCGCs in the context of emerging market firms.

Chapter 1 outlines the motivation for the book and justifies why and how it makes a contribution to strategic management research and practice. The case is advanced for nonmarket strategy as a necessary process and practice within companies and for senior management adopting a proactive approach to its design and delivery. It is argued that competitive advantage can be strengthened, renewed, or even created through an innovative and aligned nonmarket strategy. The chapter begins to survey the key literature and provide a definition of terms such as nonmarket strategy. This includes an emphasis on corporate political activity (CPA) and corporate social responsibility (CSR) as the two primary pillars of nonmarket strategy. It also discusses and describes the concept of alignment as a means of synchronizing business and market realities with political and social contexts. In addition, it lays out the logic and structure of the remainder of the book.

This chapter provides a route map for linking political and social strategies to business objectives and market positions. It advances the business case for investing in political and social strategies within a commercial organization. It starts from the premise that every organization is a community dedicated to the maintenance and development of a value-creating system in the market and nonmarket. To implement nonmarket strategies, firms must assess and evaluate the political and social benefits and costs of delivering value to different stakeholders. It suggests that individual elements of the nonmarket strategy must be built, maintained, and reinforced by keeping balance in various steps that determine business performance. Nonmarket monitoring is the final step in successful nonmarket implementation, requiring companies to foster a culture of integrity and ethics and thereby reduce risks associated with engaging with market and nonmarket stakeholders.

Trade associations work to influence regulation, government policy, and public opinion on behalf of the collective needs and objectives of their members. They also serve as agents for disseminating and exchanging information within industries, and often act as informal regulators by setting voluntary standards of behavior for industry members. Yet, despite the obvious importance of trade associations for firms, industries, and societies, management and organization researchers have devoted surprisingly little attention to understanding them. In this essay, we argue that researchers must develop a deeper understanding of their purpose, sources of influence, and impact on companies, industries, and society. We go on to discuss three examples of areas of management research—institutional theory, collective identity, and nonmarket strategy—where we believe trade associations are of particular relevance and where existing theoretical perspectives remain limited without an explicit consideration of these important organizations.

We review the extant literature on market entry modes to explain the multi-levels of the political environment that can have a moderating effect on transnational corporations’ (TNC) market entry processes. Based on a systematic review of the Uppsala model, transaction cost analysis, real options, eclectic paradigm, industrial network, and institutional approaches, we show that the market entry modes literature has largely excluded some aspects of the political environment from market entry mode decisions. Consequently, we continue to struggle with the question of how TNCs can factor the political environment into their foreign market entry processes. We suggest a more detailed analysis of the political environment may enable future research to address this challenge using corporate political activity literature and institutional theory. In particular, a distinction between macro and micro levels of analysis can explain how the moderating effect of the political environment on market entry mode decisions can be untangled.

Although international nonmarket strategy research has highlighted the importance of political ties, it is still unclear why some foreign subsidiaries are more politically active than others and what conditions may render political practices beneficial in a host country. We argue that foreign subsidiary political tie intensity — the extent to which senior managers provide time and re- sources in informally dealing with government officials for nonmarket purposes — will be influ- enced by political institutions in their parent's home country, especially when the MNE parent attempts to protect foreign subsidiary resources. Additionally, we assert that fit between a par- ent's home country political institutions and foreign subsidiary political tie intensity will posi- tively affect subsidiary performance. We employ primary data collected from 181 foreign sub- sidiaries in the Philippines and find support for our hypotheses. This study advances international nonmarket strategy research by highlighting how an MNE's home country political institutions shape subsidiary political networking and strategic performance outcomes in host country en- vironments.

The extant literature argues that nonmarket strategies can establish, sustain, or enhance a firm’s competitive advantage. Less clear is how and why effective nonmarket strategies influence a firm’s competitiveness. Moreover, the extant literature tends to examine the two building blocks of nonmarket strategy—corporate social responsibility (CSR) and corporate political activity (CPA)—separately. In this article, we extend trust to the nonmarket environment. We analyze how CSR and CPA complement each other to create strong trust between firms and the polity, and how they consequently influence government policy. We show the mediating role of trust in policy influence, and argue that CSR and CPA should be aligned for the successful influence of salient government policy.

Though managerial ties are substitutes for the weak market-supporting institutions in developing and emerging countries, little is known about the contingent value of these ties in credit markets. In this study, we disintegrate managerial ties into political and financial ties, and examine their effect on access to finance. Using agency theory, we propose that political and financial ties reduce information asymmetry between firms, politicians and banks, culminating in increased access to bank loans for firms. We also propose that CEO duality, through its influence on corporate governance and information consolidation, strengthens (weakens) the effect of financial (political) ties on access to finance. Using survey data from Ghana, we found support for our propositions. Overall, this study shows that the value of managerial ties is contingent on CEO duality. It also suggests that CEO duality is a double-edged sword with corporate governance and information implications for credit access in developing economies.

Drawing on upper echelon theory, we examine how top management team (TMT) gender diversity impacts the adoption of environmental standards in emerging countries. We further examine how this impact is affected by women executives' personal attributes as well as organizational and institutional conditions. Using panel data from 490 firms in three highly polluted emerging countries (China, India and Pakistan) and employing Probit instrumental variable regressions, we find that the proportion of women in TMTs is positively related to the likelihood of ISO 14001 certification and renewal. Additionally, we find that high institutional gender parity, women executives' power and CSR committees strengthen this relationship. Our findings, which demonstrate a systematic translation of women's values into environmental strategy, make important contributions to literature and practice.

There is significant research on the outcomes of corporate political activity (hereafter CPA). However, despite a few prior studies acknowledging the negative externalities of political activity, little attention has been paid to CPA’s dark side. In this paper, we draw on institutional and corporate governance insights to examine the relationship between CPA and bribery, which is arguably the greatest institutional failure in developing countries. Using pooled data from over 25,000 firms in 41 African countries, we find that lobbying and firm-level bribery are positively related. This relationship is weakened by in-country internet penetration and foreign ownership of firms. Taken together, the results suggest that business-government relations in weak institutional environments help to perpetuate corruption. They also suggest that internet penetration and foreign ownership help to illuminate the dark side of CPA. Leveraging this understanding, we make important contributions to the literature and highlight pertinent practical implications.

This paper reviews the diverse literature on corporate political activity (CPA) and develops a framework that details and integrates existing research in this field. A systematic analysis of extant CPA literatures is conducted to order them into domains that have implications for organizational performance. The paper is structured into three such domain emphases, which require further research investigation: resources and capabilities focus; institutional focus; and political environment focus. The contribution of each to an understanding of CPA in pursuit or defence of corporate competitive advantage is discussed. The authors also suggest that the internationalization of business, including the more recent emergence of developing country economies and companies, presents scholars with the challenge of understanding CPA in more varied institutional settings. CPA practices continue to expand as commerce goes increasingly global and, consequently, involves a wider array of political actors and institutions. The paper contributes by increasing the clarity of CPA classification, reflecting on the implications of a multi‐polar world for CPA research and advancing future agendas for scholars in this research community.

Research summary: We analyze how a host market’s institutional context can influence an MNE’s senior management’s choice and deployment of corporate political activity (CPA). First, we argue that a non-engaged approach to CPA is likely to be chosen when senior management perceives high host-country political risk, arising not only from host-country political institutions, but also from the distance between home and host-government relations. Second, we propose that the deployment of this approach can require active adaptation through four political strategies: low-visibility, ensuring a minimal degree of general attention from other actors; rapid-compliance, entailing high speed actions to obey the rules; reconfiguration, involving re-arranging the MNE’s structure and processes for competitiveness; and anticipation, implying the prediction of public policy and analysis of interest groups to anticipate responses. Managerial summary: Senior managers of multinational enterprises (MNEs) often examine when and how to engage, or not to engage, with host governments. We argue that senior managers are likely to choose to evade engagement with a host government when they perceive high host-country political risk, not only through public political risk ratings, but also via their home and host-government relations. We show that this choice can require senior managers to lead active adaptation through four strategies: low-visibility, enabling the MNE to operate under the radar of host governments; rapid-compliance, entailing high speed actions to obey the rules; reconfiguration, involving re-arranging the MNE’s structure and processes for competitiveness; and anticipation, implying the prediction of public policy and analysis of interest groups to anticipate responses.

Multinational enterprises are deeply engaged in nonmarket strategy (NMS), including both corporate political activity (CPA) and strategic corporate social responsibility (SCSR). In this review, we document the multinational NMS research according to contributions’ theme, method, context, theory, and level of analysis. We then develop an institutional multiplicity framework to organize our analysis of this large and fragmented body of literature. In so doing, we identify the most impactful contributions within three major themes – multinational CPA, multinational SCSR, and the integration of CPA and SCSR – and their respective subthemes, and call attention to limitations in the extant research. We also highlight promising avenues for future research, including expanding the scope of NMS to incorporate micro-foundations research, integrating macro-level scholarship on global institutions, placing greater attention on the interaction between CPA and SCSR, and incorporating multi-actor global issues and movements. Our review underscores the growing importance and missed opportunities of NMS research in the international business (IB) field.

This chapter reviews the collective action, corporate political activity, and corporate social responsibility literatures and concludes that most companies would benefit by recognizing cultural, industry, firm, and technological factors when deciding between individual lobbying and collective nonmarket strategies. Companies that understand the costs and benefits of both collective and individual action in the process of political and social strategy development and alignment will maintain their competitive advantage and may flourish in this environment. Therefore, companies should carefully consider when to pursue an individual versus collective approach to political and social strategy. Moreover, geographic and regional context, industry considerations, organizational scope and structure, and the specifics of a particular issue are all elements that will determine whether individual or collective activism is more appropriate and likely to be more effective. In addition, corporate behaviour, the interest of the firm, and the overall size of the group are also key determinants.

While extant research acknowledges the importance of information for corporate political activity (CPA), there is limited understanding of how information is actually used to deploy political strategies. This gap reflects a broader problem in the literature whereby Big Data (BD) research is overly focused on the impact of information on market performance but overlooks the impact on nonmarket performance. In this paper, we draw on the resource-based view to conceptualize the interrelationship between BD (i.e. information) and CPA. We argue that CPA motivates BD investments, which, in turn, shape the organization of CPA and spur the development of data-driven political capabilities. Our conceptual model, which unpacks the intricate linkages between CPA success factors, BD and political capabilities, generates important theoretical, practical and further research implications.

As David Baron noted in his Foreword to this book, non-market strategies serve one or more of five purposes: rent seeking (e.g. the continuation of government subsidies); unlocking opportunities (such as pushing for industry deregulation); defense (against rivals, non-governmental organization (NGO) criticism, community activism, or government directives); attracting customers (those who place a premium on environmental protection, social justice, or the protection of rights); and strengthening reputation, building trust, and enhancing legitimacy.

Governments and ownership structures can both facilitate and constrain organizational value creation. Firm-level political strategy is a frequent response to protect or promote organizational interests. When effectively configured and implemented, these political strategies can become capabilities. This inductive study examines the antecedents of political capabilities in European airlines within the context of cross-border market deregulation. Our central contribution is an understanding of how management teams from non-state and state airlines organize and develop divergent corporate political capabilities in this context. While managers’ actions in response to specific public policy processes can create political capabilities, the outcome is moderated by the nature of corporate ownership and the relative influence of public and private stakeholders on capability formation. Our theoretical contribution is to extend the study of organizational capabilities into the non-market context through analyzing how European flag carrier airlines organized their political capabilities in anticipation of a changing transnational policy context.

Chapter 7 introduces the concept of sensing interests as a metaphor for describing how firms can alert themselves to the complex conditions in their nonmarket environment and leverage interests to obtain and create the conditions for a more receptive and responsive set of governmental and nongovernmental stakeholders. Moreover, it provides background insights into interest representation, reviews relevant management and policy literatures, introduces key concepts, and considers the roots of modern corporate interest mobilization within the political and social spheres and in the context of nonmarket strategy. It concludes that interest mobilization has several factors that determine influence in the nonmarket—levels, organization, relationships, and targets. Also, firms must respond by growing their interest in the nonmarket using a creating, controlling, coordinating, and changing approach. Ensuring equilibrium among these factors is the basis for successful interest building.

Chapter 11 examines different institutional systems in developed, developing, emerging, and transitional economies and draws implications for the design and structure of nonmarket strategies. It notes that institutional environments differ considerably around the world, and what works in one context is unlikely to succeed elsewhere. Also, differing institutional conditions pose both challenges and opportunities for firms. For instance, institutional voids can be viewed as a positive or a negative, depending on company culture, resource, and market. Moreover, these international institutional differences have important implications for both market and nonmarket strategies and the relationships between the two. Some environments limit or curtail certain practices or strategies and, therefore, reduce the range of strategic options available to the firm. Companies typically have a range of potential strategic initiatives that are tailored to the specifics of the institutional environment and make the most of company resources and capabilities.

We explain that the reasons for this Dialog stem from the enduring gaps in our understanding of what trade associations are, how they work, and what impact they have on members, industries, markets, and societies. The Dialog includes an opening paper by Thomas Lawton, Tazeeb Rajwani and Amy Minto and is followed by contributions from Michael Barnett, Steven Kahl, Lyn Spillman, and Howard Aldrich. Building on previous and ongoing research, each author reflected on the key questions driving this Dialogue: Do trade associations matter and if so, how? We argue that not only do they matter but more attention needs to be given to their roles and responsibilities.

Non-market strategy researchers have postulated that political and social strategies reduce the exposure of firms to risk, but those arguments have received little empirical attention. In this paper, we integrate social capital and institutional theories to examine the efficacy of managerial political ties (MPTs) and corporate social responsibility (CSR) in institutional risk reduction. Using survey data from 179 firms in Ghana we find that, whereas CSR reduces institutional risk exposure, MPTs do not. We also find that the effect of MPTs on risk exposure is moderated by public affairs functions. Contrary to extant literature, we do not find evidence of complementarity between MPTs and CSR. Altogether, the findings not only show that the proposed efficacy of MPTs in risk reduction is illusive, but they also signal the need for scrutinizing the harmony between non-market political and social strategies.

The creation and preservation of competitive advantage remains the central concern of strategic managers (Lawton et al., 2013). Throughout this book, the contributors argue that in the modern world economy, the competitive advantage of a company is determined as much by its non-market strategy as it is by its market engagement. Following on Chapter 7’s discussion of corporate social responsibility (CSR), in this chapter we focus on the second pillar of non-market strategy, usually referred to in the literature as “corporate political activity” (CPA). This ranges from lobbying government through the use of political campaign contributions, to sharing information with political or regulatory actors, to attending political action committee meetings on policy formulation. Therefore, the key objectives of this chapter are to reflect on the various perspectives in the field, shed light on the dominant theoretical constructs in CPA, and set out a future research agenda. Our discussion underpins numerous subsequent chapters of this book.

Chapter 4 explores several frameworks that classify and derive implications for nonmarket strategy. It begins by explicating the importance and dynamics of uncertainty and then describes and defines the different levels and types of policy and regulatory uncertainty in the political and social environment. It shows how companies can make the most of available options by building on research into strategy under uncertainty to classify different types of policy uncertainty and the strategies best tailored to those situations, including scenario planning, real options modeling, and others. The chapter also explores how uncertainties in international markets—particularly in emerging markets—present especially challenging situations. It draws upon diverse examples to reveal what works and what does not work when a business expands its geographic horizons.

Purpose The purpose of this paper is to explore how, in unpredictable policy environments, specific managerial choices play a vital role in designing lobbying capabilities through the choice of levels of investment in human capital, network relationships and structural modification. Design/methodology/approach Using an inductive case study approach, data were collected through 42 in‐depth, semi‐structured interviews and documented archival data. Cross‐case pattern sequencing was used to construct an interpretive model of lobbying capability design. Data were framed by the dynamic resource‐based theory of the firm. Findings Heterogeneous lobbying capabilities are adapted differently in private and state‐owned airlines as a result of diverse ownership structures and time compositions that interplay with organizational processes. The result is a divergence between private‐ and state‐owned airlines in how they engage with governmental actors and policies. Research limitations/implications The paper contributes to ongoing discourse in and between the dynamic capabilities and corporate political activity literatures, particularly on how state/non‐state‐owned airlines design their political lobbying capabilities. The research is limited in so far as it only studies the European airline industry. Originality/value The paper illustrates how a specific and far‐reaching unanticipated external policy stimulus (the 9/11 terrorist attacks) impacted on management choices for lobbying design in the European airline industry.

We explore the organizational characteristics of trade associations (TAs) and suggest theoretical approaches for undertaking research into or involving TAs in management and organization studies. Through emphasizing the role of TAs within and between industries and at the interface of business and society, we consider how TAs generate meaning and influence.

We examine whether the adoption of global voluntary environmental management systems - United Nations Global Compact and ISO 14001 - lead to more effective environmental performance. Previous studies have presented inconclusive findings of voluntary environmental management systems on environmental performances. Possible reasons for conflicting results are the influence of observable and unobservable factors that affect environmental performance as well as the use of different measures of environmental performance indicators. Using primary data from Kenyan firms in 2019, waste management defined by wastewater recycling, solid waste reusing and use of environmentally safe disposal methods, we determine the effects of voluntary environmental management systems (VEMS) on firm-level environmental performance. We conclude that the adoption of VEMS are associated with significant improvement in environmental performance in developing economies. Our conclusions provide insights to corporate management and policy makers in developing countries on decisions regarding better environmental management. VEMS forms an environmental management tool suitable in confronting wastewater and physical refuse challenges as well as conducive waste disposal methods.

There is a lack of research about the political strategies used by firms in emerging countries, mainly because the literature often assumes that Western-oriented corporate political activity (CPA) has universal application. Drawing on resource-dependency logics, we explore why and how firms orchestrate CPA in the institutionally challenging context of Nigeria. Our findings show that firms deploy four context-fitting but ethically suspect political strategies: affective, financial, pseudo-attribution and kinship strategies. We leverage this understanding to contribute to CPA in emerging countries by arguing that corporate political strategies are shaped by the reciprocity and duality of dependency relationships between firms and politicians, and also by advancing that these strategies reflect institutional weaknesses and unique industry-level opportunities. Importantly, we shed light on the muttered dark side of CPA. We develop a CPA framework and discuss the research, practical and policy implications of our findings.

Institutions are vital for solving collective action problems and enabling functioning markets. Based on this notion, the institutional voids literature has offered a dynamic research agenda for international business scholarship. In this perspective article, we leverage work from political science, development economics, legal studies, and anthropology to: (a) expose hidden assumptions about institutional voids in the management literature; (b) propose new directions for research based on our revised assumptions; and (c) provide direction-specific theoretical constructs from other social sciences to stimulate theory-building and empirical inquiry into institutional voids. We develop a framework that identifies four revised assumptions about institutional voids research that we derive from current studies and elaborate on eight theoretical constructs from other social sciences that exemplify the revised assumptions and generate future research questions for international business scholars.

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.

This study applies the institution-based view and neo-institutional theory in addressing how managerial perceptions of regulator vulnerabilities to political pressure, and institutional distance, influence intensification of political ties. Our analysis of 181 wholly owned foreign subsidiary (WOFSs) operating in the Philippines suggests that managerial perceptions of regulator vulnerability to political pressures positively enhance the intensification of political ties. Our results also reveal that regulatory distance and, more importantly, the simultaneous presence of political and regulatory distance diminish the positive relationship between managerial perceptions of regulator vulnerability to political pressures and a WOFS’s propensity to enhance the intensification of political ties. Managerial implications and future research directions are discussed.

It is too easy to blame market turbulence or unexpected events for a company's poor performance; yet, this is frequently the response of managers to circumstances and activities beyond their immediate control. As a consequence, managers and owners often fail to develop strategies for coping with challenge or crisis the next time it occurs. The result is that many organizations are doomed to repeat the same or similar mistakes over and over again in a form of corporate déjà vu. To gain insights regarding how companies can better manage in hostile environments, we consider the solutions that have evolved in nature over billions of years. We trace nature's codes for adapting to hostile environments and explore the underlying characteristics of four genetic code types that can help business organizations to offset the negative implications of hostility through ensuring strategic fit. We then link the four genetic codes most frequently found in nature with organizational capabilities. When correctly identified and leveraged, these capabilities can enable a company to focus attention and resources on how to manage successfully in hostile environments.