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Advancing Nonmarket Strategy Research : InstitutionalPerspectives in a Changing World

Jonathan P. Doh, Thomas Lawton, Tazeeb Rajwani

To cite this version:Jonathan P. Doh, Thomas Lawton, Tazeeb Rajwani. Advancing Nonmarket Strategy Research : In-stitutional Perspectives in a Changing World. Academy of Management Perspectives, Academy ofManagement, 2012, pp.22-39 P. �hal-02276718�

22 Academy af Management Perspectives August

S Y P O S I U M

Advancing Nonmarket Strategy Research:Institutional Perspectives in a Changing Worldby Jonathan P. Doh, Thomas C. Lawton, and Tazeeb Rajwani

Executive OverviewNonmarket strategy is now well established as a legitimate field of research. In this paper, we review thedominant paradigms in contemporary nonmarket research and report on the key insights and findings fromthose perspectives. We use this review to suggest that the integration of institutional and strategicperspectives provides a logical path for the continued development of nonmarket strategy research goingforward. Looking ahead, our premise is that institutional perspectives will have an increased relevance tononmarket scholarship, particularly with the increasing importance of emergent economies to intemationalbusiness. As companies are required to invest more in nonmarket practices, and adapt those practices tounique country contexts, we anticipate that research will increasingly draw from multiple conceptualparadigms and perspectives.

This journal symposium has its origin in a panelorganized by two of the authors of this paperfor the Strategic Management Society (2011)

annual meetings in Miami, Florida. The sympo-sium, titled "Integrating Market and NonmarketStrategy: Institutional Perspectives in a Multi-polar World," represented an effort to refocus re-search attention on the phenomenological aspectsof institutions and their relevance to the nonmar-ket environment and nonmarket strategy (NMS).At the time we were aware of the growing interestin understanding institutions in nonmarket envi-ronments, but we believed that the field of non-market research—more specifically NMS—suffersfrom somewhat of an identity problem.

Several traditions and approaches inform thestudy of NMS, including research on corporatepolitical activity (CPA) (Hillman et al., 2004;HiUman & Hitt, 1999; Keim & Zeithaml, 1996;

Lawton, McGuire, &. Rajwani, in press; Schüler etal, 2002; Schuler, 1996; Zelner et al, 2009),public administration (Boyne, 2002; Rashman etal., 2009), and, more recently, the social andenvironmental obligations of firms as they inter-act with their external stakeholders (Boddewyn &.Doh, 2011; Husted & Allen, 2010; Yaziji, 2010;Yaziji &L Doh, 2009). However, these multipleapproaches to the nonmarket raise the question ofhow firm-environment interactions vary in dif-ferent institutional conditions (Henisz, 2000). Webelieved that an institutional perspective, broadlydefined, could offer a unifying structure for orga-nizing and positioning the range of disparate con-tributions to the study of the nonmarket environ-ment and NMS.

The institutional perspective has gained mo-mentum in exploring NMS (Henisz &. Delios,2004; Henisz & Zelner, 2003). Thus, taking a

* Jonathan P. Doh (jonathan.doh@villanova.edu) is Professor, Management and Operations; Herbert G. Rammrath Endowed Chair inInternational Business; and Director of the Center for Global Leadership at Vitlanova University.Thomas C. Lawton (lawton®em-tyon.com) is Professor of Strategy and International Management at EMLYON Business School and theOpen University Business School.Tazeeb Rajwani (tazeeb.rajwani@cranfield.ac.uk) is a Lecturer in Strategic Management at Cranfietd School of Management.

Copyright of the Academy ol Manogement, oil rights reserved. Contents may not be copied, emoiled, posted to o listseiv, or otherwise tronsmitted without the copyright holder's express written permission.Users moy print, downlood, or email oriicles for individuol ose only. http://dx.doi.org/10.5465/omp.2012.0041

2012 Dah, Lawtan, and Ra¡wan¡ 23

broad institutional perspective, this introductotypapet seeks to synthesize and integrate some ofthese dispatate litetatutes to inform contempotarysttategic challenges that emanate ftom politicaland social actots in nonmatket environments.The article incorporates some of the relevant in-stitutional strands in the NMS literature to date,emphasizing especially the importance of socialand economic institutions in consttaining andfacilitating nonmarket activity. This emphasis oninstitutions affords an opportunity to tie togethersome of the sttands of the existing NMS literaturewhile extending that NMS literatute in novel andinnovative ditections. The contributions in thispaper highlight and reinforce the relevance ofgovernmental and nongovernmental actors atmultiple levels of institutional analysis.

In approaching this opportunity, we atguethat strategies fot the nonmarket environmentate—and should be—inextricably and inexora-bly linked to traditional strategic rationalesand apptoaches, and that many of the theotiesand perspectives that have been used to in-fotm market-otiented strategies can be adoptedand incotpotated into understanding strategiesfot the nonmarket. More specifically, we suggestthat pairing and integrating the institutionalpetspectives, which tend to shed light on mac-ro-level environmental conditions and chal-lenges, and traditional sttategy theoty, whichtends to infotm industty, firm, and group behav-ior, provides a novel and useful organizing frame-work for understanding the range of NMS per-spectives. Hence, this article proposes a wider andmore inclusive approach to—and domain of—strategic management than has typically been de-fined and applied.

This introductory paper is divided into threemain sections. First, we summarize how the threemain institutional perspectives can be levetagedto inform nonmarket strategy from a macro/coun-try/contextual point of view. Second, we reviewthtee main strategy perspectives that can infotmnonmatket strategy from industty, organization,and individual points of view. We select and high-light how nonmarket scholars have applied orlargely drawn upon those theories in their explo-ration of nonmarket phenomena. We then suggest

how the othet thtee atticles in this symposium, tosome degree, combine macro-level institutionalpetspectives with micro-level strategy atguments,hy positioning these papers at the intersection ofthese two overarching approaches. Finally, wesuggest paths for future nonmarket tesearch, withparticulat focus on institutional factors.

Institutional Perspectives onNonmarket Research

The nonmarket environment differs from thematket environment in several important re-spects. First, the market environment consists

mainly of suppliers, customers, and competitots.The nonmatket environment, by contrast, can bechatacterized primarily by the social, political, le-gal, and cultutal arrangements that consttain orfacilitate firm activity. Second, in the matket en-vironment fitms typically compete for resources,revenues, and profits, while the nonmarket envi-ronment considets broader dimensions of impactand performance such as ethical behavior, policyattainment, and social responsibility. Firms arecompeting in their nonmarket environments prin-cipally with private interests within their indus-tries or across other industries, but also collabo-rating and competing with political and socialactors.

The strategies developed by firms in the non-market environment ate a means to effect out-comes such as superior profits (Baron, 1995; Baron&. Diermeier, 2007). More important, an NMSmaps the institutional situation to a set of possihlenonmarket actions, such as building coalitions,lobbying legislators or regulators, making cam-paign conttibutions, and providing information toaffect institutions that might defend or createrevenues, while a market strategy maps the indus-try structute to a set of market actions, such aspricing, quality imptovements, or product differ-entiation. Both of these strategies can ptovide acompetitive advantage relative to matket rivals,but both scholars and managers need to under-stand the institutional factors in more detail innonmatket research.

The nonmarket context also has a darker side,where corruption and immotal practices can dom-

24 Academy of Management Perspectives August

inate. This is a result of rent-seeking behavioroften endemic in nonmarket strategy, which caninclude everything from legal forms such as lob-bying to illegal forms such as bribe paying. Dis-honesty and exploitation can thus determine thenature of a nonmarket strategy. This is particularlyevident in many emerging markets, where highlevels of corruption are the norm.

There is undoubtedly a reflexive and interac-tive relationship between the market and non-market environments. For most firms, nonmarketforces can affect economic as well as political andsocial performance (Baron, 1995, 1997). Moreimportant, nonmarket rent-seeking behavior mayalso include other activities such as joining apolitical action committee, holding conferences,litigating a case in court, and mobilizing socialactors to support or oppose a strategic initiative.Building on this point, we explore the fundamen-tal question of how NMSs should be developed.This question is important as it relates to both theinterests and the institutional boundaries ofthe firm.

Hotho and Pedersen (2012) provide a compre-hensive synthesis and review of institutional the-ory as it relates to international business (IB)research. Here we draw on that review in ouranalysis of how institutional perspectives can in-form NMS. Hotho and Pedersen (2012) begin bynoting that scholars of politics, law, economics,sociology, and management have offered variedconceptualizations of institutions and their im-pact. Further, they suggest that this diversity ofperceptions "implies that institutional approachesdiffer in their explanatory power in that theyaddress and explain fundamentally difference fac-ets of social life" (p. 238).

NMS, like IB, is a field that draws on severaldisciplines and is concerned with multiple levelsof analysis, and so it is only natural that differenttraditions of institutional theory inform NMS(Hotho &. Pedersen, 2012). We begin by lookingat the multifaceted concept of NMS that stillseems underdeveloped, misunderstood, incorrectlyapplied, and inappropriately implemented. Somescholars would argue that new leaming and devel-opments in NMS must continue to evolve to beuseful for managers. In that spirit, we offer a re-

joinder to Baron's seminal 1995 article, whichidentifies that for managers, the key challenge isin understanding the political, social, regulatory,and cultural environment if they are to have amore strategic approach to the nonmarketenvironment.

Building on Baron's (1995) ideas, when weexamine the NMS literature using institutionaltheory, three distinct patterns emerge to informthe NMS fleld. At first glance, the research isembedded in multiple yet discrete institutionalperspectives and levels of analysis (at times inter-twined and overlapping) to explain the phenom-enon. As Hotho and Pedersen (2012) point out,however, there is a widely understood division ofthis literature into three somewhat distinctstrands or streams. In the IB area, for example,they note that the papers in a 2008 Journal ofInternational Business Studies special issue on "In-stitutions and International Business" drew onthese three specific institutional approaches: newinstitutional economics (Glougherty &. Grajek,2008), neo-institutional perspectives (Orr 6A.Scott, 2008), and national business systems (Jack-son &. Deeg, 2008), and that is the basic classifi-cation we adopt here.

Hence, given our IB emphasis, we follow thisthree-strand approach in our classification of theinstitutional theory literature relevant to NMS.Rather than seek to be exhaustive in our discus-sion of each strand, we map the key insights andtheir value to NMS, drawing on Hotho and Ped-ersen's (2012) review. We acknowledge that thesecategories are not fully discrete nor discriminant.Indeed, given that they all fall under a broad"institutional" school, their overall orientationemanates from similar traditions, levels of analy-sis, and perspectives. Nonetheless, we believe it isuseful to examine some of the distinctive contri-butions of each to NMS, recognizing that thesedistinctions are relative—not absolute—ones.

New Institutional Economics

As Hotho and Pedersen (2012) suggest, one dom-inant institutional perspective that has gainedtraction in IB and that is equally relevant to theNMS literature is the new institutional economics(North, 1990). A principal feature of new institu-

2012 Pah, Lawton, and Rajwoni 25

tional economics is a focus on the role of eco-nomic and industrial organization, and the role ofpolitical governance in developing and maintain-ing these institutional structures, with the effect ofinfluencing the process of national developmentand adaption. New institutional economics argu-ments can also be found in the NMS field, wherepolitical and regulatory uncertainty shape thenonmarket strategy choices and market entry de-cisions of firms (Bonardi, Holburn, & VandenBergh, 2006; De Figueiredo, 2009). Managementstudies here have placed particular importance onnational and intemational markets with high un-certainty, where economic development canstrain traditional institutional arrangements.

As Hotho and Pedersen (2012) observe, therole of institutional arrangements in economicsdrew increasing attention in a variety of disci-plines in the 1980s and 1990s through the work ofNoith (1990) and Williamson (2000). New insti-tutional economics suggests that the nature ofexchange processes is dependent on the rationaleof agents, regulations, and specificity of the con-text. The institutional rules and regulations affectthe profits firms make (North, 1990) and theproductivity of countries and the firms in thosecountries (Hotho & Pedersen, 2012). For in-stance, Singapore is consistently ranked as one ofthe most open economies and best places to dobusiness due, in part, to the predictability of itspolitical and regulatory system. Gonversely, Ven-ezuela ranks low in terms of political and regula-tory certainty, and its economic condition reflectsthat status.

Taken from the vantage point of the new in-stitutional economics tradition, institutions affectfirms' ability to maintain a competitive advantage,especially as they enter new markets. This is dueto institutional frameworks having various im-pacts—particularly added cost and increased un-certainty—on firms setting up new operations inhome or host countries. Dependable, stable, andpredictable host country institutions, therefore,help to reduce economic costs and level of uncer-tainty (Hotho & Pedersen, 2012; North, 1990).They also contribute to creating strong capitalmarkets (Hillman, Zarkhoodi, &. Bierman, 1999).However, the quality of the institutional frame-

works depends on the experience of ñrms withpolicy makers and the opportunity firms have tolearn from others in the nonmarket environment(Bonardi et al., 2006). Ring, Lenway, andGovekar (1990) further suggested that the effectof the institutional environment on the firm isalso a function of industry structure. In essence,the nature of the industry, including its hierarchyand competitive structures, further determines theimpact of the institutional context on individualfirms. Gonsequently, strategies deployed by man-agement are a function of the degree of institu-tional impact on the firm and the firm's strategicpredisposition toward the nonmarket environ-ment (Ring et al., 1990). As Jacobson, Lenway,and Ring (1993) suggested, the ways managers ofmultinational enterprises (MNEs) structure eco-nomic transactions will limit the costs resultingfrom institutional interventions. They argued thatthe traditional focus on the dyadic relationshipbetween supplier and buyer misses sources oftransaction costs. This is important because con-ceptualizing economic transactions as embeddedin a nonmarket context will help firms maintaintheir position and competitiveness.

Neo-lnstitutionalism

Reflecting a general understanding of the threeinstitutional traditions, Hotho and Pedersen(2012) introduce a second institutional perspec-tive as neo-institutionalism, sometimes referred toin institutional or organizational sociology. Thistradition places primary emphasis on social struc-tures and relationships that occur within societ-ies—both formal and informal—and how thesestructures define and shape broader systems andthe role of organizations within them. These ex-ternal social pressures produce tendencies for or-ganizations to resemble one another; as DiMaggioand Powell (1983, p. 148) said, "There is suchstartling homogeneity in organizational forms andpractices." In this example, a given ecosystem offirms adopts isomorphic NMS to respond to com-mon institutional pressures and in so doing influ-ences political actors collectively (Lawton & Raj-wani, 2011). Subsequently, the national-level andsubnational-level pressures maintain diversity inthose NMSs adopted by firms, as seen in Table 1,

26 Acodemy of Management Perspectives August

Table 1Institutional Perspectives on Nonmarket Research

New institutionaleconomics

Neo-institutionolperspectives

Nationol businesssystems

Level of atialysisIntematiotial/nationalBonordi etal. (2006)Delios and Henisz (2003)Hillman etal. (1999)Jacobson etal. (1993)Ring etal. (1990)

National/subnafional/non-national

Boddewyn and Doh (2011)Yazi¡i(2010)Scherer and Palozzo (2011)Getz(1997)

Iniernolional/cross-natíonalSun et al. (2010)HallandSoskice(2001)Jackson and Deeg (2008)Khanna and Palepu (2005)Whitley(1999)

Key insightPolitical and regulatory uncertainty

shapes firms' nonmarket strategychoices and market entry decisions.

Social farces enable and canstrain thepolitical actors charged withenacting and enforcing publicpolicies.

Variations in political-economic modelsrequire attention to differences inactor and stakehalder interests.

ExampleSingopare is consistently ranked as one of the most open

economies and best places to do business due to theopenness and predictability of its political and regulatorysystem. Conversely, Venezuela ranks low in terms ofpolitical and regulatory certainty, and its economic fortunesare similarly affected.

Civil society norms and NGO actions dictóte the investmentclimate and policies of government and therefore shapeforeign market choices of firms. For instance, setting up afactory in Germany is mare expensive and time-consumingthan doing so in Turkey, involving greater civil society inputand influence.

Chinese firms entering Europe acknowledge the regulatoryuniformity created hy EU membership but can takeadvantage af the variances that occur in individual countrymarkets due to different tax regimes and labor laws.

unlike the comparative capitalism and nationalbusiness systems perspectives.

NMS studies using neo-institutional perspec-tives consider the social obligations—and strate-gies—of firms as they interact with their externalstakeholders (Boddewyn &. Doh, 2011; Husted &.Allen, 2010; Yaziji, 2010; Yaziji & Doh, 2009).We find that conceptualizing NMS with stake-holders or social actors reaffirms its place in theinstitutional field. More important, NMS has fullyincluded key stakeholders, going so far as to ex-plain the enforcement of public policies. There-fore, instead of firms being seen as the product ofsocially prescribed and institutional pressures,they are seen as social structures that exert agencyand pressure on their institutional environment.

Civil society norms and actions dictate theinvestment climate and policies of govemmentand therefore shape firms' foreign market choices.For example, establishing a business may be moreexpensive in a m.ore developed economy than inan emerging one because of the various actorsinvolved. A key element of this neo-institutionalperspective is that societal actors have demonstra-ble effects on the competitive advantage of firmsand the competitive dynamics of industries and

can affect profitability (MacAvoy, 1992). NMSscholars have offered a variety of theoreticalroutes to address the role of civil society (Ya.ziji &Doh, 2009). The neo-institutional scholars withinthe NMS field have addressed issues around re-sponsibility of social and political actors. Morespecifically, the responsible behaviors here refer tothe kind of effects of responsible social relation-ships with specific actors that affect firmperformance.

Firms are viewed not as separate from but asembedded within the social environment inwhich they operate (Hillman & Hitt, 1999; Hol-bum & Vanden Bergh, 2008). Here, some NMSscholars have viewed interactions with institu-tional actors as obstacles to be avoided or over-come (Getz, 1997). Scherer and Palazzo (2011)used the term "political CSR [corporate socialresponsibility]" to describe the growing role ofprivate firms as active participants in emergingforms of global governance. This role is notnew—at least not for Westem multinationals. Re-searchers studying NMS are increasingly inter-ested in understanding how firms from emergingmarkets deal with social forces that constrain po-litical actors and influence policy outcomes.

2012 Pah, Lawtan, and Rajwani 27

Firms often do not fully understand or knowhow to deal with institutional forces that affectpolitical actors and therefore respond with NMSsthat may be obsolete or ineffective. An examplecan be seen in the difficulties British Airways(BA) faced because of European Commission de-mands during its initial moves toward a mergerwith American Airlines. These demands—specif-ically to sell a sizable number of landing slots atHeathrow Airport—had been underestimated byBA. BA's overconcentration on British regulatoryauthorities (versus those in the United States andat the supranational level) meant that the com-pany neglected to build and leverage an activepolitical relationship with the increasingly asser-tive European supranational authority. Conse-quently, the airline's slow adaptation to the shiftin authority from London to Brussels hampered itsstrategic moves to build global competitiveadvantage.

Moreover, the institutional conditions and un-derlying philosophy of a region or country maydetermine firms' preferred approach to NMS. Forinstance, the European Union (EU) and theUnited States have fundamentally different ap-proaches to creating and enforcing competitionrules. This is due to the EU's primary emphasis onconsumer interests and protection, compared withthe U.S.'s chief concern with a level playing fieldfor companies to compete. U.S. firms such asAmerican Airlines, GE, Honeywell, and Mi-crosoft have all fallen foul of this difference inemphasis, with the European Commission basingits competition policy decisions more on con-sumer choice impact than on business imperativesand corporate logic.

National Business Systems

The third dominant institutional theory perspec-tive is the national business systems approach toNMS (Whitley, 1999, 2007), a perspective thatoverlaps somewhat with the previous two views,but focuses on a somewhat different—and morespecific—set of questions, namely to explain thepersistence of differences among national eco-nomic systems. In the 1990s, some institutionalstudies attempted to explain why internationallybased patterns of economic and social factors per-

sisted (Hall & Soskice, 2001). They did so bystressing the importance of differences in actorand stakeholder relationships cross-nationally,and how this power variation is used throughformal and informal institutions (Djelic, Noote-boom, & Whitley, 2005).

NMS scholarship remains hobbled by a thinaccount of institutions and their effect on businessperformance, especially in understanding the im-pact of institutional differences across jurisdic-tions and the impact of these differences on per-formance (Jackson &. Deeg, 2008). Even explicitlycomparative studies develop only a superficial un-derstanding of how different institutions and theircontexts interact with firms—what Jackson andDeeg referred to as generic conceptions of influ-ences that exist across all institutional settings(2008). This is problematic due to sociopoliticalstructures that help give an account of the non-market environment faced by firms. Governmentsworldwide are responsible for inputs to a nationalbusiness system (human capital through school-ing; resource use through legal systems), and thecurrent lack of sophisticated study of these insti-tutional arrangements prevents scholars from ap-preciating how, for example, Brazil or India devel-ops world-class firms.

Overall, research focused on national businesssystems tries to explain why, in an era of global-ization, distinctive, nationally based patterns ofeconomic life persist. Moreover, studies using thisperspective have sought to identify distinct formsof national business systems and understand theirresilience in the face of the homogenizing pres-sures of globalization (Whitley, 1999). They havedone so by stressing the importance of power insocial relationships in developing NMS and howthis power is used through formal and informalinstitutions (Djelic et al., 2005). Other studieshave built on the political relationships by incor-porating a national business systems approach intotheir analysis (Sun, Mellahi, &. Thun, 2010; Sun,Wright, & Mellahi, 2010). For instance. Sun et al.(2010) identified the mechanisms of how politicalembeddedness interacts with national businesssystems in determining competitive advantages.Their longitudinal study unravels the mechanismsthat lead to the declining, and even negative.

28 Academy af Management Perspectives August

value of foreign investors, strengthening politicalemheddedness in the Chinese economy because ofchanging status and legitimacy of local politicalactots with whom these firms have developed ties.

Many papers using this perspective identify thecomparative nature of business systems. Jacksonand Deeg's (2008) call for more comparative workrevolved mainly around greater awareness of in-temational settings, specifically that Japanese andEuropean institutional settings need to be cross-examined. The work on emerging markets hastended to concentrate on how institutional voidsshape firm development and operations (Khanna&. Palepu, 2005). Other comparative work hasdrawn attention to the political role of Westernfirms as providers of community services (e.g.,education and social services) in emerging mar-kets (Boddewyn & Doh, 2011). Peng (2003) andDieleman and Sachs (2008) noted that the weakor fluid natute of institutions in emetging matketssuggests that political activity fot firms revolvesaround social networks and the exploitation offamily ot other social connections.

This is a complex intemational ptocess, as thework of Dieleman and Boddewyn (2012) shows.In studying the telationship of the SalimGroup—a large Indonesian husiness group—withthe Suharto tegime, they noted the complex in-ternal arrangements within the gtoup designed tomanage multiple facets of its relations with theIndonesian govemment. This work draws atten-tion to the potential liabilities of political ties andthe need fot emerging market firms to create buff-eting mechanisms to insulate the fltm ftom ad-verse effects if the political situation becomes lessfavorable. Table 1 captures the thtee distinct in-stitutional petspectives previously outlined andindicates how each informs the field of NMSresearch.

Strategy Perspective on NMS Research

The preceding section illustrates our focus oninstitutional effects at different levels, high-lighting three cross-cutting theoretical strands

that underpin the strategy perspectives on andapproaches to nonmarket research. The role andimpact of institutions on strategy vary dependingon home or host country, industry, strategic group.

and firm specificity. In strategy theory, we alsoidentify three dominant vatiants that allow us todelineate the opetationalization of NMS. Theseperspectives are industrial organization, resource-based, and network. Much of the wotk in NMSstudies dtaws on one ot more of these theoteticalapproaches, implicitly or explicitly intertwiningthem with some sort of institutionalism. We elah-otate on each of these petspectives in the nextsections.

Industrial Organization Perspective

Much of the tesearch in NMS adopts an industtialotganization (10) lens. Beginning with the classicMason (1939) and Bain (1968) perspectives onindustrial organization, strategy scholats, notablyPortet (1980), have argued that industry com-position and dynamics are critical variables tounderstanding competitive success. Although Pot-tet's five-force model did not explicitly acknowl-edge the tole of govemment, he and othets didnote how govemment could influence a numberof the fotces, for example, by creating higher bar-riers to entry through regulation or other means.In his subsequent work, which applied industtialorganization theory to national economies. Porter(1990) fully acknowledged the tole of govem-ment, especially in stimulating development ofindustries to help them become nationally andthen glohally competitive.

Public policy, regulation, and social preferencesaffect the overall atttactiveness of an industry andthe competitive forces and dynamics within it.More important, studies have leveraged formaleconomic models of NMS to incorporate repeatedrounds of strategic choices and political uncer-tainty, with the ptimary role of NMS being shap-ing initial expectations and thus influencing thejoint market and nonmarket equilibrium choicesof the fitm (Baron, 2001). Baron (1997) suggestedthat firms can overcome political uncertainty andthe liabilities associated with specific industries inthe political and regulatory environment by de-veloping specific NMS—lobbying, campaign con-tributions, and so on—to influence regulatory de-cisions. According to Baron, firms sometimes optfot international expansion rather than ptoduct

2012 Doh, Lawton, and Rajwani 29

diversification due to intensified competition andsignificant industry regulation.

The ncnmarket environment highlights thatgovemments, activists, and the media have be-come adept at holding companies to account forthe social consequences of their actions. In re-sponse, IO studies have looked at NMS as beingan inescapable priority for business leaders in ev-ery country (Baron, 1995). Strategic theories ofGSR (McWilliams, Siegel, &. Wright, 2006),which assert that a company's social practices areintegrated into its business and corporate-levelstrategies, are integral to NMS. Baron (2001)coined the term "strategic GSR" and argued thatcompanies compete for socially responsible cus-tomers by explicitly linking their social contribu-tions to product sales. The strategic perspective onGSR underscores the potential benefits of beingviewed as a good corporate citizen and the poten-tial differential effects on flrms with differentcharacteristics and profiles. Reinhardt (1999) ex-plicated these opportunities with respect to envi-ronmental strategies, building on Porter (1980) tointroduce three basic approaches to strategic GSR:a product differentiation strategy, a low-cost strat-egy, and a strategic interaction strategy. Only thestrategic interaction strategy falls within the areaof nonmarket strategy. The other two fall squarelywithin the realm of market strategy, but highlightthe importance of this area for firms.

More recently, scholars concerned with theindustry environment for NMS have questionedwhy firms encounter difficulties in developingstrategies to address the regulatory and social ele-ments of their given industry and market contexts.Porter and Kramer (2002) proposed that the maincause of this difficulty is a divergence of economicinterests and ethical objectives in business opera-tions. Although Porter and Kramer (2002, 2006,2011) did not use the term "nonmarket strategy,"they did argue that value chain opportunities thatcan benefit society and/or the environment canalso create market opportunities. They noted thatthe tension between these different goals is com-mon in highly regulated industries. More funda-mentally, lack of empirical conflrmation of a pos-itive correlation between the two is a causal factor

in the strategic failure of companies to address theinterplay and impact.

Porter and Kramer (2002, 2006) argued thatcorporate philanthropy—an NMS—could be bet-ter aligned with GSR practices and leveragedmore effectively to enhance a firm's competitiveadvantage. They posited that philanthropy strat-egy should not be used solely as a way to enhancethe firm's corporate reputation, but should be em-ployed more strategically. An example of strategiccorporate philanthropy would be a firm supportingeducation programs in the local community thatwould subsequently enhance the skill base of thepotential future employees available to the firm.Tata Group has done so very effectively in India.For example, Tata has engaged legislators to in-troduce policies that would make books and pen-cils available for free to every child to encouragesocial mobility and economic vitality.

Although NMS can have positive effects onthe firm and its environment, it can sometimes becounterproductive. This is true for two reasons.First, NMS may pit business against society, whenin reality the two are interdependent. Second, itpressures companies to think of NMS in genericways instead of in the way most appropriate totheir individual business strategies. Some ap-proaches to NMS are so disconnected from marketstrategy as to obscure opportunities for companiesto benefit society. Porter and Kramer (2006) sug-gested that if corporations were to analyze theiropportunities for social legitimacy using the sameframeworks that guide their core business choices,they would be in a stronger position to pursuetheir market and nonmarket activities in a moreintegrated fashion. They also proposed a new wayto look at the relationship between business andsociety that does not treat corporate growth andsocial welfare as a zero-sum game. They suggestthat NMS should be viewed as an opportunityrather than as "damage control."

We argue that the NMS adopted by firms canbe cost-effective and a charitable deed. However,it can also be a potent source of innovation andcompetitive advantage. For instance, the compet-itive dynamics and growth strategies of airlines arecurtailed by public policy requirements and inter-governmental agreements on route access and ex-

30 Academy of Management Perspectives August

pansion. In Western European and North Amer-ican markets, pressure from civil society hasresulted in more stringent environmental controlsand legal requirements imposed by national, in-temational, and supranational regulatory author-ities, easyjet, a leading European airline, has beeninfluenced and even pressured by these authori-ties, but has also sought to embed social factorsinto its NMS to address and even preempt someaspects of regulatory influence that constrain itscommercial success. For instance, easyjet is work-ing with aircraft and component manufacturers todevelop what it has dubbed the "easyjet ecojet,"aimed at cutting carbon dioxide emissions by 50%by 2015. easyjet is one of the first airlines tooutline in detail the environmental requirementsthat must be met by the next generation of short-haul aircraft.

Resource- and Capabilities-Based Perspective

An emerging perspective in the NMS field is thatbrought by resources and capabilities in firms andstrategic business units. Building on the resource-based view (RBV) of the firm, the concept oforganizational capability has emerged as a primaryexplanatory framework of competitive advantage(Ethiraj, Kale, Krishnan, & Singh, 2005; Teece,Pisano, &. Shuen, 1997). A number of scholarshave suggested that firm resources and capabilitiescan be integrated into the nonmarket environ-ment, notably in respect to relations with politi-cians or regulators (Bonardi et al., 2006; Gapron&. Ghatain, 2008; Frynas, Mellahi, &. Pigman,2006; Lawton, Rajwani, &. Doh, in press; Oliver &Holzinger, 2008) and social actors (Hillman et al.,2004; McWilliams &. Siegel, 2011), as shown inTable 2, below. However, some critics of theseNMS studies based on the RBV of the firm havesaid they are not paying attention to the manage-rial coordinative processes and capabilities bywhich firms assemble and leverage political re-sources to build robust NMS (Dahan, 2005).

McWilliams, Van Fleet, and Gory (2002) ex-tended the RBV theory of the firm to show that itcan be used to analyze the effectiveness of NMS.They demonstrated that NMS can raise rival costsby blocking the use of substitute resources. Theseresources would otherwise be available to those

rivals; however, by preventing their use throughNMS, the "focal" firm gains an important advan-tage. An example would be blocking legislationthat might provide a rival with access to an im-portant govemment contract or "pork-barrel"project. In related work, we have proposed thatNMS can be viewed from the perspective of thecapabilities literature, and just as is the case in thecommercial environment, differing NM capabili-ties can contribute to the success or failure ofNMS. We have suggested that it is important toidentify and explicate the NMS processes bywhich political resources are integrated and de-ployed. In particular, firms can—and do—lever-age their financial, human, and network resourcesto support their NMS strategy. An example iswhen a firm mobilizes a broad company-wide cam-paign (e.g., a charitable project) that leverages theentire company and its constituent business unitsand employees, and in so doing bolsters legitimacyin communities in which it works (Lawton et al.,in press; Lawton & Rajwani, 2011; Pearce &Doh, 2005).

Even before the application of RBV theory toinform NMS, the idea of nonmarket resources hadbeen acknowledged in the literature. Fainsod(1940) suggested that an industry obtains favor-able regulation through its capacity to mobilizethree kinds of resources: financial (political cam-paign financing), human (the use of lobbyists andlawyers), and political (political coalition build-ing). More recently, Dahan (2005) described non-market capabilities as being mainly technical-eco-nomic expertise in lobbying govemment (i.e.,technical, political, or economic). Nonmarket re-sources are characterized as having organizationalattributes (an in-house office or permanent regu-latory person), public image qualities (perceptionof stakeholders), reputation resources (individualand firm responsibility), and financial commit-ment (direct finance, political campaign contri-butions or indirect finance, events, and confer-ences) (Dahan, 2005). Most research to date,however, has failed to address the potential col-lective nature of these nonmarket resources.Moreover, the notion of assembling specific re-sources and skills was initially mentioned byYoffie and Bergenstein (1985), who spoke of how

2012 Doh, Lowton, ond Rajwani 31

Table 2Strategy Perspectives on Nonmarket Research

Industrial organizationperspective

Resource andcopabilitiesperspective

Network perspective

Level of onalysisIndustry/firmsPorter and Kromer (2002)Porter and Kramer (2006)Baron (1997,2001)

Firm/SBUCapron and Châtain (200B)McV^illiamsetal.(2002)Oliver and Holzinger (2008)

Firm/sfrategic groupFrynas etal. (2006)Mahon etal. (2004)Rowley etal. (2000)

Key insightPublic policy, regulation, and social

preferences affect the overallattractiveness of on industry and thecampetitive forces and dynamicswithin it.

Firm-level approaches to configuring,combing, and deplaying politicalresources enable them to adapt to,anticipate, and even shope changesin the corporate political and socialenvironment.

Corporate political ties constitute onetype of boundary-spanning personaland institutional linkages betweenfirms and governmental/socialagents thot enable a firm to acquireor retain a competitive advantage.

ExampleThe competitive dynamics and growth strotegies of

airlines are curtailed by public policy requirementsand intergovernmental agreements on route accessand expansion. In Western European and NorthAmerican markets, pressure from civil society hasresulted in more stringent environmental controlsand legal requirements imposed by notional,international, and supranational regulatoryauthorities.

Gaogle and Wikipedia collected online signatures andleveraged this stakeholder resource to forcecongressional sponsors of the controversiol StopOnline Piracy Act, or SOPA, to withdrow their supportfor this legislation in the U.S. Congress.

When German trade and retail group Metro Cosh andCarry entered Russia, the persanal ties fostered inodvonce with the then-mayor of Moscow, YuriLuzhkov, facilitated their preferential market entryand expansion.

firms accumulate nonmarket capital. As a result,we believe that the RBV theory is very useful inour understanding of the configurations and com-binations of nonmarket resources to create polit-ical weight in NMS.

Some NMS studies show how resources areleveraged by large organizations within a widerange of industries, including oil and gas (Frynaset al., 2006), electronics (Lawton, 1996; Yoffie &Bergenstein, 1985), and air transport (Lawton,1999). Oliver and Holzinger (2008) used theNMS perspective with RBV theory to examinethe capacity of firms to deploy skills and politicalresources to successfully manage and influence thepublic policy process. In general, however, thesecapabilities are developed based on the firm's ex-perience in a specific country and so may not beportable across geographies (Bonardi et al., 2006).NMS capabilities may also include the aptitude tofind political resources and patterns of behavior indifferent types of institutional environments, tocorrectly assess the source and nature of expropri-ation hazards, and to successfully negotiate withpolitical and regulatory actors (Bonardi et al.,2006). For instance, Google and Wikipedia col-

lected online signatures to force congressionalsponsors of the controversial Stop Online PiracyAct, or SOPA, to withdraw their support for thislegislation in the U.S. Congress.

Network Perspective

The third viewpoint is the network perspective,which explores strategic responses to institutionalchanges using relationships. Network ties in thenonmarket are boundary-spanning personal andinstitutional linkages between firms and govern-mental agents that tend to enable a firm to acquireor retain a competitive advantage. Typically,gaining networks or nonmarket capital from thepolitical and social systems is important for anybusiness firm. Interactions with govemment offi-cials can provide firms with unique informationabout governmental processes that are often oth-erwise difficult and expensive to obtain (Frynas etal, 2006; Hillman et al., 1999). In addition, non-market capital may improve a firm's access to thepolicy-making process; for example, firms may beinvited to testify before Congress or appointed tokey policy advisory committees. Nonmarket cap-ital also augments a flrm's political and social

32 Academy af Management Perspectives August

reputation and therefore increases its consider-ation in the -legislative and regulatory processes.Clearly, having nonmarket capital enables a firmto be more effective in the political and socialprocess. Such access makes outcomes favorable tothe firm more likely and may lead to improvedfinancial performance.

One area that has been gaining momentum inthe NMS literature is the role of nonmarket cap-ital within business-government relations. Therehave been some important discussions of socialcapital within the political context (Brehm &Rahn, 1997) and some references to political cap-ital in management literature (Shaffer &. Hillman,2000). However, there is little consensus abouthow nonmarket capital operates within the non-market sphere. Because the construct has multipleapplications at the firm and strategic group levelsof analysis, the operationalization of nonmarketcapital poses significant challenges.

Building on Shaffer and Hillman (2000), wedefine nonmarket capital as the ability of firms toinfluence political and social actors and agendasusing reputation, relationships, expertise, and fi-nance. Some scholars have suggested that social orreputational capital is a specialized type of non-market capital (Oliver & Holzinger, 2008). Draw-ing from Nahapiet and Ghoshal's (1998) opera-tionalization of social capital, Shaffer and Hillman(2000, p. 178) stated that nonmarket capital en-tails resources "embedded within, availablethrough and derived from the network of relation-ships possessed by a social unit." Another compo-nent of nonmarket capital is a firm's investment inthe capability to implement effective NMS bydeveloping access to decision makers, knowledge,and expertise (Frynas et al., 2006). Other studiesequate nonmarket capital more closely with thebenefits derived from relationships such as politi-cal influence, access to policy makers, and in-creased knowledge about public policy arenas(Mahon, Heugens, & Lamertz, 2004).

The initial step for corporations interested increating nonmarket capital is to form ties withelected officials. A tie is characterized by thefrequency of interaction between partners andtheir resource commitment (Rowley, Behrens, &.Krackhardt, 2000). Firms must decide whether it

is strategically advantageous to form a weak or astrong tie. Weak ties involve less of a resourcecommitment, are less frequent, and constitutemore of an arm's-length transaction. Economicexamples include marketing agreements and li-censing and patent agreements between compa-nies (Rowley et al., 2000). Strong ties involvegreater resource commitments and more frequentinteractions. Partners have to invest in these re-lationships before they yield any benefits. Equityalliances and joint ventures, for example, repre-sent market transactions with strong ties (Rowleyet al, 2000).

The decision to form a weak or a strong tie withan elected official or social actor may be based onan analysis of the different roles that ties play andthe diverse political circumstances that exist. Cor-porations have a finite amount of time and energyto invest in relationships, so they have to decidewhich approach will be most beneficial (Seibert,Kraimer, «Si Liden, 2001). There are numerousadvantages to weak ties: They are cheaper to form(they can form through fairly ordinary activitiessuch as providing a campaign contribution ormeeting at a social event), are easier to maintainthan strong ties (because they involve less con-tact), serve a bridging function (enabling a firm tomake the connection between two different net-works; Seibert et al, 2001), and may be helpful forunderstanding trends in uncertain environments(Rowley et al, 2000). The downside of weak tiesis that the firm is unlikely to receive specific ordetailed information about an issue because itlacks intimacy with the informant. This may limitthe firm's ability to receive the full offering ofpolitical benefits a politician can provide.

Forming strong ties obviously involves moretime commitment. However, a strong tie with anelected official also yields strategic benefits. Afirm will receive more information as well asdeeper knowledge of a specific topic (Uzzi, 1997).Strong ties also enhance trust, mutual gain, reci-procity, and a long-term perspective (Larson,1992). In the nonmarket arena, this may implythat a firm will gain an in-depth understanding ofpending political events or social impacts. In ad-dition, a firm with strong ties may develop good-will and a history of reciprocity with elected offi-

2012 Dah, Lawtan, and Rajwani 33

cials that yield other political heneflts such aspolitical sponsotship and access to congressionalor parliamentary heatings and advisory commit-tees. Fot instance, when German trade and retailgroup Metro Cash and Carry entered Russia, thepetsonal ties fosteted in advance with the then-mayor of Moscow, Yuti Luzhkov, facilitated itsptefetential matket entry and expansion. How-ever, with strong ties, the firm has considerabletime and effort invested with that particulat pol-itician. The firm may be vulnerable if that officialleaves office, loses his or her position of power(such as when the majority party changes), ot isinvolved in a scandal Table 2 synthesizes thearguments highlighted above.

Integrating Institutional andStrategic Perspectives

The previous review suggests that there are con-siderable and unrealized opportunities fot com-bining and integrating perspectives ftom the

three institutional schools with those of the threestrategy petspectives to better inform NMS, bothconceptually and practically. The point of depat-ture for this symposium research forum was there-fore our helief that institutional theoty can helpadvance NMS research. In this section, we pro-pose how comhining insights from the institu-tional petspectives with those of the three strategyschools can bettet inform contemporary phenom-ena. In this section, we huild on the overall themeof integration by briefly reviewing the collectivecontributions of the articles in this symposiumand showing how the vatiation in the institu-tional environment interacts with firm-specificNMS. Collectively, these contributions link thebroad institutional perspectives we have summa-tized above to the thtee core strategic perspectiveswe have outlined in the previous section. Table 3presents our summary and synthesis of their con-tributions, positioning them at the intersection ofthe institutional and strategic perspectives, yield-ing nine overarching themes.

Perspective 1 : New Institutional Economics

Given its broad focus on national-level institu-tions and their impact on otganizations, the newinstitutional economics perspective ptovides a

broad context within which to consider how in-dustries and firms operate in the nonmarket envi-ronment. For example, institutional environmentsin which industries ate highly regulated or majorfirms are state-owned influence the attractivenessof industries and the relevant pressures and influ-ences within them. Thetefore, firms' capacity tobuild and levetage resources and capabilities isdependent on legal, regulatory, and govemmentalpolicies. Futthermore, different institutional envi-ronments may allow—or prohibit—specific kindsof lobbying, advocacy, or othet political funding.Finally, the nature of differing political-economicsystems may favor certain classes of political lead-ers, making political network telationship more orless valuable under these differing conditions. Wenext offer some comments on the emerging ninethemes (Table 3) and the telative positioning ofeach symposium paper (see Table 4) and reflect onthe integration of NMS and institutional factots.

( 1 ) Contexts. One theme that unites NMS and theinstitutional environments is context. This con-struct is an important contrihution made hy allthree of the symposium papers but especially byKingsley, Vanden Bergh, and Bonardi, who in-vestigate NMS in the context of political mat-kets and regulatory uncertainty using the newinstitutional economics petspective. Specifi-cally, they assess the design of nonmatket sttat-egies to manage regulatory uncertainty and dis-cuss ways for firms to integrate these with theitmarket strategies. The authots advance a frame-work for predicting the magnitude of regulatoryuncertainty and develop sttategic implicationsfor firms to manage tegulatory uncertainty inthe context of theit market investments. Theysuggest the dimensions of a nonmarket sttategythat fits well with the characteristics of thepolitical matket to create an integrated strategy.They also provide examples from several marketentry choices that involve diffetent nonmatketstrategies and offet suggestions for futute te-search in this area.

Henisz and Zelner also explore context but fo-cus on intemational business. Specifically, theyare interested in the diffeting contexts of polit-ical tisk, which they perceive as the impetus fot

34 Academy of Management Perspectives August

Table 3Integrating Market and Nonmarket Strategy Perspectives: Conceptual and PracticalComplementarities and Synergies

New institutionaleconomics

Neo-institutionolperspective

Notional businesssystems

Industrial organization

Competitive dynamics within industries areinfluenced hy hroad institutionol-economic conditions ond choices, such asontitrust policies.

Social octors express preferences throughinvestment and purchasing choices thataffect industry attractiveness and therole ond influence of orgonizotions olongthe value choin. For exomple, industry-specific labor and humon rights codesand standords are partly a result ofinstitutionol pressure from socialmovements ond octors.

Differences in notionol business systemstranslate into differing industry-specificcompetitive environments. For example,industriol policies favor specificindustries ond creóte opportunities (andsometimes chollenges) for investors.

Resource-based view

Firms' copocity to build and leverage resourcesond copobilities is dependent on legol,regulatory, and governmental policies. Forexample, different institutional environmentsmay allow—or prohibit—specific kinds oflobbying, odvococy, or other politicolfunding.

Firms may be subject to chollenges from socioloctors that constroin their ability to buildlegitimocy and bolster reputational assetsond/or they moy develop copabilities toinfluence those actors to ochieve their goals.

Differences in notional business systems requirethe development and deployment of politicolresources and copobilities toilored to thosedifferences.

Network perspectiveDie nature of differing politicol-economic

systems may fovor certoin dosses ofpoliticol leoders, moking politicolnetwork relationship more or lessvoluoble under these differingconditions.

As in the case of the neo-institutionalperspective, the nature of differingsocial systems and preferences of socialactors determine network relationshipOS being more or less voluoble underthese differing conditions.

Network relotionships moy toke differentforms, involve different actors, andyield distinct outcomes depending onthe broader business system in whichthey emerge and evolve.

Table 4Integrating Market and Nonmarket Strategy Perspectives: Positioning Contributions in ThisSymposium

New institutionol economicsNeo-institutional perspectiveNational business systems

Industrial organization Resource-based view Network perspective

Kingsley, Vanden Bergh, ond BonordiHenisz ond Zelner

Sun, Mellohi, and Wright

intemational nonmarket strategy research inthe first place. They contend that the actions ofpolicy makers in other countries can representcues about appropriate behavior or experiencesthat can inform policy choices. Multilaterallenders may also influence domestic policy out-comes through their conditional lending prac-tices. The authors further emphasize that oneimportant area for future research is the linkageof nonmarket and market strategy research inthe shared context of domestic and intema-tional business.

(2) NMS process. Kingsley, Vanden Bergh, andBonardi examine why firm entry decisions

into new geographic areas involve marketrisk. They highlight that the investmentmay also subject the firm to risk associatedwith process in regulation/public policythat either reduces the firm's profitability orblocks the firm from meeting other objec-tives. NMS processes typically lead to di-chotomized outcomes, resulting in eitheruncertain or certain policy implications forfirms. In part the policy uncertainty derivesfrom the need for regulators to learn how toregulate new business models and technol-ogies. A second, related mechanism generat-ing policy uncertainty comes from the polit-

2012 Doh, Lawton, and Rajwoni 35

ical games taking place among the variousplayers involved in the regulatory process—inparticular, regulatory agencies, politicians,firms, consumers, and activist interest groups.The important point to note is that NMSprocess is determined by the various compet-itive dynamics within the industry choicesbut is also shaped by the actors in the networkand the firm's resources.

(3) Resource bundles. All three articles implic-itly or explicitly reflect a more nuanced de-piction of relational resources and human ca-pabilities that are dependent on legal andregulatory policies. Kingsley, Vanden Bergh,and Bonardi draw inspiration, at least indi-rectly, from the notion that firms have heter-ogeneous capabilities for responding to and,in some cases, leveraging nonmarket re-sources to affect institutional environments

Perspective 2: Neo-lnstitutionalism

The integration of neo-institutionalism with thethree strategic perspectives also provides interest-ing and useful insights for the NMS field. Previousarticles and our symposium article by Henisz andZelner demonstrate keen attention to strategicchoice, actcfrs, and structures, which shows howorganizations respond to, and interact with, insti-tutions and institutional pressures from the threestrategy perspectives. These themes are high-lighted and discussed below.

(4) Choice. In the case of industrial organizationeconomics, social actors express their prefer-ences through investment and purchasingchoices that, in tum, affect industry attrac-tiveness and the role and influence of organi-zations along the value chain. For example,the many codes, standards, and norms devel-oped to encourage industries to adopt betterenvironmental, labor, and human rights prac-tices are primarily a result of institutionalpressure from social movements and actors.The firms' strategic choices to invest in influ-encing nonmarket actors are deliberate in ex-ploiting opportunities in these industries. AsHenisz and Zelner argue, when firms are ap-parently free to make strategic choices, they

should identify and evaluate options againstthe preference criteria and select the bestoption to achieve the intended policyoutcomes.

(5) Actors. A common theme across all papers inthis symposium is the importance of socialactors. From a firm-level resource and capa-bilities perspective, firms may be subject tochallenges from social actors that constraintheir ability to build legitimacy and bolsterreputation, or they may develop capabilitiesto influence those nonmarket actors toachieve their own goals. Take, for example,the social pressures exerted on Apple to im-prove labor and working standards amongtheir intemational contractors and subcon-tractors. Social institutional pressure couldresult in real and meaningful changes in sup-ply chain relationships among participants inthe electronics and cellular handset indus-tries. Therefore, the nature of differing socialsystems and preferences in social actors candetermine the value appropriation by firms inthose different social systems.

(6) Structure and performance. All the papersdemonstrate the high degree of taken-for-granted assumptions about firms' strategicresponses to institutional structure and theconsequent impact on organizational per-formance. Early institutionalism describedflrms as temporary outputs of institutionalpressure without any attention to firm perfor-mance. However, the articles here demon-strate keen attention to performance, bothdirectly and indirectly. Both Henisz and Zel-ner and Sun, Mellahi, and Wright illustratehow specific strategic responses can help toimprove performance in nonmarket environ-ments with high political constraints. Wesuggest that in these papers, and in earlierNMS studies by these authors (Henisz & Zel-ner, 2006; Zelner et al., 2009), the inclusionof traditional variables of institutional struc-ture, together with the addition of nationaland supranational political and social actors,can help to better inform performancestudies.

36 Academy of Monogement Perspectives August

Perspective 3: Notional Business Systems

National business systems studies have sought toidentify forms of business systems and understandtheir resilience in the face of the homogenizingpressures of globalization. The integration of thiscomparative approach in understanding distinctnational political-economic systems with strategytheory can help inform how the same strategicpositions may result in different outcomes, de-pending on the unique national business environ-ment.

(7) Competition. In the case of industrial organi-zation economics, differences in nationalbusiness systems translate into differing indus-try-specific competitive environments. Forexample, industrial policies favor specific sec-tors or groups of firms, but competition canstill create costs for other competitors in thoseindustries. In a strategic situation consideredby Baron (1997), the total retum to an NMSincludes not only the retum from opening arival's market, but also the retum on therevised market strategy by the rival because ofNMS. The lesson here is that NMS is alsoabout mapping the institutional national sys-tem characteristics to a set of possible actions,such as lobbying, coalition building, or infor-mation provision in relation to competitivedynamics. As highlighted by all of our sym-posium papers, NMS serves the same objec-tive of maximizing overall profits by partici-pating effectively and responsibly in thepublic process leading to the resolution ofnonmarket issues. For instance, NMS unlocksmarket opportunities from different nationalbusiness systems, as the firm works on a mar-ket-opening trade agreement cross-nationallyby eliminating regulation through lobbyingactions to change barriers to entry.

(8) Tie and sequence order. From a networkperspective, the theme of "tie and sequenceorder" is an important strategic response inintegrating NMS with the national businesssystems perspective. Sun, Mellahi, andWright argue for a contingency perspective ofcorporate political ties and develop an inte-grative framework incorporating market envi-

ronment, nonmarket environment, and in-terorganizational and intraorganizationalfactors that condition the value of politicalties. The authors propose operating mecha-nisms through which network-based politicalcapital may turn into liabilities for a focal firmleading to undesired effects on performance.They suggest that their paper deepens our un-derstanding of network-based corporate politi-cal strategy and of its relationship with marketstrategy.

(9) Different national systems. Sun, Mellahi,and Wright suggest that differing nationalsystems of economic and political organiza-tion prompt differing political and social net-works, which must be carefully cultivated andmanaged. Interestingly, in dynamic andchanging systems of national institutions,these network relationships can constituteboth a liability and an asset for firm growthand success. As was the case in the neo-institutional view, network relationships maytake different forms, involve diverse actors,and yield distinct outcomes depending on thebroader business system in which they emergeand evolve.

Table 3, above, summarizes the potential concep-tual and practical complementarities and syner-gies between and among the three institutionaland three strategy perspectives. Table 4 seeks toposition the three other articles in this symposiumwithin this framework.

Conclusions

The institutional environment is a dynamic andself-renewing system, framed by state, intema-tional, and nongovernmental forces and popu-

lated by corporations large and small, interestgroups, and individuals striving to have theirvoices heard (Coen, 1998; De Figueiredo & Tiller,2001; Lawton & Rajwani, 2011). This symposiumcaptures the current and significant new directionfor NMS research. In this direction, firms areviewed as constructs that interpret and elaborateinstitutional pressures. The new research is atten-tive to the economic perspectives of new institu-tionalism, the sociological perspective of neo-in-

2012 Doh, Lawton, and Rajwani 37

stitutionalism, and the cross-national perspectiveof national systems. Fully realizing the potential ofthese dominant themes, future research must in-corporate IO perspectives, resource perspectives,and network perspectives to better understand thestrategic responses to institutional factors in thenonmarket environment. We identify several keythemes that help to inform the integration ofNMS with institutional factors. These themes arecontexts, process, resource bundles, choice, actors,structure and performance, competition, tie andsequence order, and variation in business systems,which all help to solidify specific NMS responses.

In fully acknowledging these themes and newresearch areas, and with the increasing global eco-nomic and political power of Brazil, Russia, India,China, and other emerging economies, this evo-lution in NMS thought and practice is renderedincreasingly important for business and manage-ment. The challenge ahead is for researchers tobuild on the progress of these articles by extendingour understanding of firms and managers as inter-mediaries tD shape and be shaped by institutionalenvironments.

Acknowledgments

We thank AMP co-editor Don Siegel for his support andencouragement, two anonymous reviewers for their valuableinsights, and the other contributors for agreeing to partici-pate in this symposium and for their unique insights intononmarket strategy research.

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