Essays on Nonmarket Strategy

Abstract

A growing body of strategy and management literature emphasizes the importance of nonmarket strategy, not only as a stand-alone strategy but also as part of an integrated strategy in dealing with frequent regulatory change and political/regulatory actors and agencies. Nevertheless, many areas in non-market strategy remain unexplored. In particular, scant research has examined the nonmarket behaviors of foreign multinational enterprises (MNEs). Thus, in my dissertation, I examine various aspects of non-market strategies using U.S. federal lobbying and other related datasets. The first chapter with Jordan Siegel, explores institutional drivers of the lobbying of foreign multinational enterprises (MNEs). Particularly, we examine how different levels of corruption in the home country influence the political engagement of multinational enterprises. It has been generally assumed that lobbying and corruption are substitutes for each other. However, study results are counter-intuitive in that firms from countries that rank as suffering from higher levels of corruption are less likely to engage in lobbying after controlling for country characteristics, such as country competitiveness, economic ties between the U.S. and a focal foreign country. The second chapter with Shon Hiatt, we examine the role of agency embeddedness on administrative decision. While research has argued that agency embeddedness is unidirectional, benefiting government agencies, we propose that it can be bidirectional and that firms can use their interactions with state agencies to their advantage. Drawing upon political sociology and organizational community research, we argue that a firm’s geographic proximity to local government offices enhances the bidirectional nature of agency embeddedness, thereby enhancing greater rapport with agency officials and access to valuable information. Using government contract data from the United States Department of Defense, we find that spatial proximity between a local contracting office and a bidding firm increases the firm’s propensity to receive larger government contracts and that this effect varies depending on the level of decision-making discretion of the contracting officers. This study has theoretical and managerial implications for research on business-government relations, institutional theory, and organizations and communities. In the last chapter, I examine whether lobbying by foreign defense contractors leads to positive outcomes and the potential mechanism underlying this process, using U.S. Department of Defense (DoD) contract data and lobbying and campaign financing data that I compiled. Assuming that foreign MNEs are socially less inclusive and have weaker political capital than domestic firms do, the question arises as to how and why foreign MNEs engage in lobbying, which requires a great deal of political capital, and whether they can achieve non-market outcomes. In this paper, I show that foreign MNEs can purchase political capital through outside lobbyists, a practice that enables them to achieve better contract outcomes.