Populist Syndrome and Nonmarket Strategy

Abstract

Although recognized as a defining feature of the current political era, populism and its implications for non‐market strategy remain undertheorized. We offer a framework that (a) conceptualizes populism and its progression over time; (b) outlines the risks populism generates for firms; and (c) theorizes effective nonmarket strategies under populism. Our framework anchors the political risk profile of populism in three interdependent elements: anti‐establishment ideology, de‐institutionalization, and short‐term policy bias. These elements jointly shape the policymaking dynamics and institutional risks for firms under populism. Our analysis shows how firms can calibrate two nonmarket strategies – political ties and corporate social responsibility – to mitigate populism‐related risks. We specify how particular configurations of political ties and CSR activities, aimed at the populist leadership, bureaucrats, political opposition, and societal stakeholders, minimize risk under populism. Further, we theorize how the effectiveness of specific attributes of political ties and CSR – namely their relative covertness (more vs. less concealed) and their relative focus (narrowly vs. widely targeted) – varies as a function of firm type (insiders vs. outsiders) and the probability of populist regime collapse. Finally, we address how motivated reasoning may bias firms' assessments of regime fragility and resulting strategy choices.

Disentangling the role of the institutional environment in the ownership competence framework: A comment on Foss et al. (2021)

“…Finally, we know very little about the logic of strategic management in authoritarian political contexts. Several contributions have touched on aspects that help to explain how entrepreneurs and firms behave when democracy erodes (e.g., Blake et al, 2022; Klein et al, 2022; Neuberger, Kroezen, & Tracey, 2021). Nevertheless, we still have a long way to go—and with a sense of urgency.…”

“…Other examples come from practices of crony capitalism. Several studies discuss how businesses benefit from close ties to political leaders, with specific reference to how this might lead to more expansive ownership (e.g., Blake, Markus, & Martinez‐Suarez, 2022). If a firm's political ties provide a competitive advantage in any industry, then the firm can expand its boundaries to include many businesses that would not otherwise be acquired (Dorobantu et al, 2017).…”

Toward an institution-based paradigm

“…Contrary to the concerns expressed in Criticism 1, while the institution-based view started with an early geographic emphasis on emerging economies, it has subsequently expanded to assert its reach globally-in both emerging and developed economies. A rapidly evolving institution-based view of deglobalization and sanctions embodies such a global approach (Blake et al, 2022;Devinney & Hartwell, 2020;Li et al, 2022;.…”

Effect of populism on the internationalization of emerging market firms

“…We contribute to the literature by identifying populism as a variable that encourages Multilatinas to internationalize due to policy uncertainty as a result of the institutional decline of the home country. We also empirically test the claim of theoretical scholarship that populism reconfigured the sociopolitical and institutional forces that shape global business (Blake et al , 2022; Devinney and Hartwell, 2020; Hartwell and Devinney, 2021). We advance institutional theory by demonstrating that the internationalization decision of domestic firms is partially influenced by changes in the rules of the game (North, 1990), which occur under populist regimes.…”

“…Recent studies cited that institutional deterioration in countries ruled by populists may shape the nonmarket strategies of firms (Blake et al , 2022; Panibratov et al , 2022), affect entrepreneurial activity (Bennett et al , 2022) and influence the allocation of foreign direct investment (FDI) (Carballo Perez and Corina, 2023; de Sousa et al , 2021). Thus, the potential effect of this deterioration on the internationalization motivation of emerging market firms (EMFs) remains under-explored.…”