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

Abstract

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.

Managing socio-political risk at the subnational level: Lessons from MNE subsidiaries in Indonesia

“…For instance, the establishment of close subnational level political ties with key administrative officials provides firms with benefits that stem from the fact that "most rules and regulations are ambiguous, and their enforcement is subject to the personal interpretations of government officials" (Luo & Park, 2001, p. 465). Yet, despite the importance of localized risk management strategies and engagement with local officials, a recent review by Sun et al (2021) indicates that subnational institutions are understudied, which calls for more research aimed at deepening our understanding of the dynamic interactions of MNEs with multiple subnational-level political actors in host markets.…”

“…Relations with local authorities can be seen as potential sources of cooperation, and can have a positive impact on subsidiary performance (Luo, 2001). Yet, research on when and how firms can leverage subnational institutions-including relationships with subnational-level political actors in host markets-is still in its infancy (Sun et al, 2021). Thus, while scholars are increasingly recognising the need to disentangle the impact of institutions at multiple levels (Monaghan et al, 2014;Onuklu et al, 2021), significant gaps remain in our understanding of how subnational variations shape firm strategies (Hutzschenreuter et al, 2020).…”

“…While the MNEs' social accommodation may appear to have been targeted explicitly towards the well-being of the general population, in reality, CSR had often been used strategically during negotiations with local authorities (Dang et al, 2020;Sun et al, 2021). For instance, the firms had leveraged CSR activities and had offered employment to the local labour force as bargaining tools suited to manage political risk-e.g., when negotiating access to regions or to speed up a business licencing process.…”

“…It has been well-established that MNEs seek to obtain social licenses to operate (Shapiro et al, 2018)-or, indeed, legitimacy (Elg et al, 2015)-through collaborative efforts that involve CSR (Girschik, 2020). The need to identify risk, negotiate with stakeholders, and build legitimacy is also a well-known factor that pertains to MNE expansion into emerging markets (Sun et al, 2021). However, we argue that the complexity linked to MNE operations in diverse subnational regions in emerging markets requires further investigation into the risk management strategies that are adopted by such firms in order to succeed in international markets (Dang et al, 2020;Sun et al, 2021).…”

“…The need to identify risk, negotiate with stakeholders, and build legitimacy is also a well-known factor that pertains to MNE expansion into emerging markets (Sun et al, 2021). However, we argue that the complexity linked to MNE operations in diverse subnational regions in emerging markets requires further investigation into the risk management strategies that are adopted by such firms in order to succeed in international markets (Dang et al, 2020;Sun et al, 2021). Interestingly, the types of socio-political risk we identified-which are commonly associated with emerging markets-had hardly been an issue at the national government level but had caused huge challenges at the subnational one.…”