Integrated market and nonmarket strategies: Empirical evidence from the S&P 500 firms’ climate strategies

Firms with well-formulated competitive market strategies could still fail due to their lack of effective nonmarket strategy. Climate change poses significant threats to firms and presents firms’ need to develop nonmarket strategy integrated with market strategy. Relying on the unique dataset of US S&P 500 firms’ responses to climate change, this study seeks to ask why some firms attempt to engage in climate policy making, while others do not do so. The results found that firms with organizational resources and capabilities underlying their carbon market strategy are more likely to support mandatory climate policy. It sheds light on the significance of integrated market and nonmarket strategies, particularly when business opportunities are controlled more by governments than by markets.

Open for business in a closed world? Managing MNE nonmarket strategy in times of populism and geopolitical uncertainty

Purpose This paper aims to consider how multinational enterprises 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. Design/methodology/approach This paper aims to explain 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 multinational enterprises 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 limitations/implications We anticipate that nonmarket strategy scholars can build on these themes to assess how nonmarket strategies can better enable multinational enterprises to survive and thrive in an age of heightened global risk and uncertainty. Originality/value This paper and the related special issue provide new theoretical insights by bringing attention to the relatively under-researched realm of multinational enterprise nonmarket strategy, particularly in populist contexts and during periods of geopolitical uncertainty. We identify four promising domains – resilience and legitimacy, diversification, the integration of market and nonmarket strategy, and institutional arbitrage – for international business scholars investigating nonmarket strategy to consider. We hope that our paper, as well as other papers in this special issue, provide further momentum to this growing area of research.

Navigating cross-border institutional complexity: A review and assessment of multinational nonmarket strategy research

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 microfoundations research, integrating macrolevel 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 field.

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.

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.

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

Purpose Many 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/approach In 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. Findings Facing 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/value The 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.