Political Markets and Regulatory Uncertainty: Insights and Implications for Integrated Strategy

Abstract

Managers can craft effective integrated strategy by properly assessing regulatory uncertainty. Leveraging the existing political markets literature, we predict regulatory uncertainty from the novel interaction of demand-and supply-side rivalries across a range of political markets. We argue for two primary drivers of regulatory uncertainty: ideology-motivated interests opposed to the firm and a lack of competition for power among political actors supplying public policy. We align three previously disparate dimensions of nonmarket strategy-profile level, coalition breadth, and pivotal target-to levels of regulatory uncertainty. Through this framework we demonstrate how and when firms employ different nonmarket strategies. To illustrate variation in nonmarket strategy across levels of regulatory uncertainty, we analyze several market entry decisions of foreign firms operating in the global telecommunications sector.

Political Tie Heterogeneity and the Impact of Adverse Shocks on Firm Value

“…In sum, our study integrates the political embeddedness perspective and the literature on emerging economy political institutions to unravel a more nuanced picture of political tie utilization. In doing so, we extend the conventional perspective adopted in developed economies, which portrays political ties as facilitators of business‐government transactions on an implicit political market (Bonardi et al, ; Kingsley et al, ). This paves the way for more disaggregated, multilevel investigations into the impacts of political embeddedness on firm outcomes across different contexts.…”

Reconceptualizing competitive dynamics: A multidimensional framework

“…Here, the toolkit progresses from one that is quintessentially economic to one that is in many ways political. Kingsley, Vanden Bergh, and Bonardi () provide a framework that describes when and how firms carry out nonmarket actions in an effort to mitigate regulatory uncertainty. Capron and Chatain () explicitly view a firm's political actions as a vital, but underexplored, element of a firm's competitive repertoire, building on the notion of political markets—parallel to product and resource markets—in which firms compete strategically to shape the regulatory environment in their favor (Bonardi, Hillman, and Keim, ).…”

Reality or Illusion? The Efficacy of Non‐market Strategy in Institutional Risk Reduction

“…Precisely, we rely on the micro−macro link of social capital theory (Acquaah, 2007;Peng and Luo, 2000) to argue that, in emerging countries where market institutions are weak, the micro ties that senior managers establish with influential politicians can enable their organizations to gain access to private information, influence government policy and reduce exposure to institutional risk (Acquaah, 2007;Luo, 2001;Luo and Zhao, 2013;Peng and Luo, 2000). This argument is based on the new institutional economics perspective (North, 1990;Williamson, 2000) which emphasizes the effect of political governance on institutional structures (Doh, Lawton and Rajwani, 2012) and the strong link between political or regulatory uncertainty and non-market strategy (Kingsley, Vanden Bergh and Bonardi, 2012;White, Boddewyn and Galang, 2015). It is strengthened by the fact that political stakeholder management in emerging countries revolves around social ties and networks (Dieleman and Sachs, 2008;Rajwani and Liedong, 2015).…”