Skip to main content
SpringerLink
Log in

Political Schemas and Corporate Political Activities During Foreign Market Entry: A Micro-process Perspective

  • Research Article
  • Published:
Management International Review Aims and scope Submit manuscript

Abstract

The paper analyses how multinational enterprises (MNEs) manage their interactions with host governments during the market entry process. A qualitative multiple case study collected data through in-depth interviews with multiple participants in six New Zealand MNEs. The analysis identifies two distinct political schemas which represent MNE managers’ assumptions and heuristics regarding how to approach interactions with foreign governments, systematic and episodic, which lead to the enactment of distinct patterns of political activities, each supported by certain political resources and capabilities. We then identify several sources of the variations in these two political schemas at the managerial, firm, industry, and country levels of analysis. Our study deepens understanding of the micro-processes of corporate political activity (CPA) and the processes and activities through which political resources and capabilities are developed, deployed and leveraged by MNE actors in managing their interactions with host governments during the market entry process. In doing so, we highlight the role of international experience in influencing the process of political capability development, and also the role of managerial actions in shaping this evolutionary process.

This is a preview of subscription content, log in via an institution to check access.

Access this article

Log in via an institution

Price excludes VAT (USA)
Tax calculation will be finalised during checkout.

Instant access to the full article PDF.

Institutional subscriptions

Fig. 1

Similar content being viewed by others

References

  • Aharoni, Y. (1966). The foreign investment decision process. Boston: Division of Research, Graduate School of Business Administration, Harvard University.

    Google Scholar 

  • Augier, M., & Teece, D. J. (2009). Dynamic capabilities and the role of managers in business strategy and economic performance. Organization Science, 20(2), 410–421.

    Google Scholar 

  • Baron, D. P. (1995). The nonmarket strategy system. Sloan Management Review, 37(4), 73–85.

    Google Scholar 

  • Baron, D. P. (2005). Business and its environment (5th ed.). New York: Prentice-Hall.

    Google Scholar 

  • Barron, A., Pereda, A., & Stacey, S. (2017). Exploring the performance of government affairs subsidiaries: A study of organisation design and the social capital of European government affairs managers at Toyota Motor Europe and Hyundai Motor Company in Brussels. Journal of World Business, 52(2), 184–196.

    Google Scholar 

  • Baysinger, B. (1984). Domain maintenance as an objective of business political activity: An expanded typology. Academy of Management Review, 9(2), 248–258.

    Google Scholar 

  • Birkinshaw, J., Brannen, M. Y., & Tung, R. L. (2011). From a distance and generalizable to up close and grounded: Reclaiming a place for qualitative methods in international business research. Journal of International Business Studies, 42(5), 573–581.

    Google Scholar 

  • Boddewyn, J. J. (1975). Corporate external affairs: Blueprint for survival. New York: Business International Corporation.

    Google Scholar 

  • Boddewyn, J. J. (2007). The Internationalization of the Public-Affairs Function in US Multinational Enterprises Organization and Management. Business and Society, 46(2), 136–173.

    Google Scholar 

  • Boddewyn, J. J., & Brewer, T. L. (1994). International business political behavior: New theoretical directions. Academy of Management Review, 19(1), 119–143.

    Google Scholar 

  • Bogner, W. C., & Barr, P. S. (2000). Making sense in hypercompetitive environments: A cognitive explanation for the persistence of high velocity competition. Organization Science, 11(2), 212–226.

    Google Scholar 

  • Bonardi, J. P., Holburn, G. L. F., & Vanden Bergh, R. G. (2006). Nonmarket strategy performance: Evidence from US electric utilities. Academy of Management Journal, 49(6), 1209–1228.

    Google Scholar 

  • Bonardi, J. P., & Vanden Bergh, R. G. (2015). Political knowledge and the resource-based view of the firm. In T. Lawton & T. Rajwani (Eds.), The Routledge companion to non-market strategy (pp. 12–28). London: Routledge, Taylor and Francis Group.

    Google Scholar 

  • Brannen, M. Y., & Voisey, C. J. (2012). Global strategy formulation and learning from the field: Three modes of comparative learning and a case illustration. Global Strategy Journal, 2(1), 51–70.

    Google Scholar 

  • Brouthers, K. D., & Brouthers, L. E. (2003). Why service and manufacturing entry mode choices differ: The influence of transaction cost factors, risk and trust. Journal of Management Studies, 40(5), 1179–1204.

    Google Scholar 

  • Buckley, P. J., Devinney, T. M., & Louviere, J. J. (2007). Do managers behave the way theory suggests? A choice-theoretic examination of foreign direct investment location decision-making. Journal of International Business Studies, 38(7), 1069–1094.

    Google Scholar 

  • Carpenter, M. A., Geletkanycz, M. A., & Sanders, W. G. (2004). Upper echelons research revisited: Antecedents, elements, and consequences of top management team composition. Journal of Management, 30(6), 749–778.

    Google Scholar 

  • Conroy, K. M., & Collings, D. G. (2016). The legitimacy of subsidiary issue selling: Balancing positive and negative attention from corporate headquarters. Journal of World Business, 51(4), 612–627.

    Google Scholar 

  • Creswell, J. (1998). Qualitative inquiry and research design: Choosing among five traditions. Thousand Oaks: Sage Publications.

    Google Scholar 

  • De Villa, M. A., Rajwani, T., & Lawton, T. (2015). Market entry modes in a multipolar world: Untangling the moderating effect of the political environment. International Business Review, 24(3), 419–429.

    Google Scholar 

  • Delios, A., & Henisz, W. J. (2003). Political hazards, experience, and sequential entry strategies: The international expansion of Japanese firms, 1980–1998. Strategic Management Journal, 24(11), 1153–1164.

    Google Scholar 

  • Denzau, A. T., & North, D. C. (1994). Shared mental models: Ideologies and institutions. Kyklos, 47(1), 3–31.

    Google Scholar 

  • Doh, J. P., Lawton, T. C., & Rajwani, T. (2012). Advancing nonmarket strategy research: Institutional perspectives in a changing world. Academy of Management Perspectives, 26(3), 22–39.

    Google Scholar 

  • Doz, Y. (2011). Qualitative research for international business. Journal of International Business Studies, 42(5), 582–590.

    Google Scholar 

  • Dubois, A., & Gadde, L.-E. (2014). Systematic combining: A decade later. Journal of Business Research, 67(6), 1277–1284.

    Google Scholar 

  • Dunning, J. H. (2000). The eclectic paradigm as an envelope for economic and business theories of MNE activity. International Business Review, 9(2), 163–190.

    Google Scholar 

  • Eisenhardt, K. M. (1989). Building theories from case study research. Academy of Management Review, 14(4), 532–550.

    Google Scholar 

  • Eisenhardt, K. M., & Martin, J. A. (2000). Dynamic capabilities: What are they? Strategic Management Journal, 21(10–11), 1105–1121.

    Google Scholar 

  • Ellis, P. (2000). Social ties and foreign market entry. Journal of International Business Studies, 31(3), 443–469.

    Google Scholar 

  • Elsbach, K. D., Barr, P. S., & Hargadon, A. B. (2005). Identifying situated cognition in organizations. Organization Science, 16(4), 422–433.

    Google Scholar 

  • Erkelens, R., Hooff, B., Huysman, M., & Vlaar, P. (2015). Learning from locally embedded knowledge: Facilitating organizational learning in geographically dispersed settings. Global Strategy Journal, 5(2), 177–197.

    Google Scholar 

  • Erramilli, M. K., & Rao, C. P. (1993). Service firms’ international entry-mode choice: A modified transaction-cost analysis approach. Journal of Marketing, 57(3), 19–38.

    Google Scholar 

  • Felin, T., Foss, N. J., & Ployhart, R. E. (2015). The microfoundations movement in strategy and organization theory. The Academy of Management Annals, 9(1), 575–632.

    Google Scholar 

  • Frynas, J. G., Mellahi, K., & Pigman, G. A. (2006). First mover advantages in international business and firm-specific political resources. Strategic Management Journal, 27(4), 321–345.

    Google Scholar 

  • Gavetti, G. (2005). Cognition and hierarchy: Rethinking the microfoundations of capabilities’ development. Organization Science, 16(6), 599–617.

    Google Scholar 

  • Gioia, D. A., Corley, K. G., & Hamilton, A. L. (2013). Seeking qualitative rigor in inductive research notes on the Gioia methodology. Organizational Research Methods, 16(1), 15–31.

    Google Scholar 

  • Grant, R. M. (1996). Toward a knowledge-based theory of the firm. Strategic Management Journal, 17(S2), 109–122.

    Article  Google Scholar 

  • Hadjikhani, A. (2000). The political behavior of business actors: The case of Swedish MNCs and the EU. International Studies of Management & Organization, 30(1), 93–117.

    Google Scholar 

  • Hadjikhani, A., & Ghauri, P. N. (2001). The behaviour of international firms in socio-political environments in the European Union. Journal of Business Research, 52(3), 263–275.

    Google Scholar 

  • Hambrick, D. C., & Mason, P. A. (1984). Upper echelons: The organization as a reflection of its top managers. Academy of Management Review, 9(2), 193–206.

    Google Scholar 

  • Helfat, C. E., & Peteraf, M. A. (2015). Managerial cognitive capabilities and the microfoundations of dynamic capabilities. Strategic Management Journal, 36(6), 831–850.

    Google Scholar 

  • Helfat, C. E., & Winter, S. G. (2011). Untangling dynamic and operational capabilities: Strategy for the (N) ever-changing world. Strategic Management Journal, 32(11), 1243–1250.

    Google Scholar 

  • Henisz, W. J. (2003). The power of the Buckley and Casson thesis: The ability to manage institutional idiosyncrasies. Journal of International Business Studies, 34(2), 173–184.

    Google Scholar 

  • Henisz, W. J. (2014). Corporate diplomacy: Building reputations and relationships with external stakeholders. Sheffield, UK: Greenleaf Publishing

    Google Scholar 

  • Henisz, W. J., & Delios, A. (2002). Learning about the institutional environment. Advances in Strategic Management, 19, 339–372.

    Google Scholar 

  • Henisz, W. J., & Zelner, B. A. (2003a). The strategic organization of political risks and opportunities. Strategic Organization, 1(4), 451–460.

    Google Scholar 

  • Henisz, W. J., & Zelner, B. A. (2003b). Legitimacy, interest group pressures and change in emergent institutions: The case of foreign investors and host country governments. Academy of Management Review, 30(2), 361–382.

    Google Scholar 

  • Hillman, A., & Hitt, M. A. (1999). Corporate political strategy formulation: A model of approach, participation, and strategy decisions. Academy of Management Review, 24(4), 825–842.

    Google Scholar 

  • Hillman, A., Keim, G., & Schuler, D. (2004). Corporate political activity: A review and research agenda. Journal of Management, 30(6), 837–857.

    Google Scholar 

  • Hillman, A. J., & Wan, W. P. (2005). The determinants of MNE subsidiaries’ political strategies: Evidence of institutional duality. Journal of International Business Studies, 36(3), 322–340.

    Google Scholar 

  • Holburn, G. L., & Zelner, B. A. (2010). Political capabilities, policy risk, and international investment strategy: Evidence from the global electric power generation industry. Strategic Management Journal, 31(12), 1290–1315.

    Google Scholar 

  • Holtbrügge, D., Berg, N., & Puck, J. F. (2007). To bribe or to convince? Political stakeholders and political activities in German multinational corporations. International Business Review, 16(1), 47–67.

    Google Scholar 

  • Hoskisson, R. E., Wright, M., Filatotchev, I., & Peng, M. W. (2013). Emerging multinationals from mid-range economies: The influence of institutions and factor markets. Journal of Management Studies, 50(7), 1295–1321.

    Google Scholar 

  • Huber, G. P. (1991). Organizational learning: The contributing processes and the literatures. Organization Science, 2(1), 88–115.

    Google Scholar 

  • Jiménez, A., Benito-Osorio, D., Puck, J., & Klopf, P. (2017). The multi-faceted role of experience dealing with policy risk: The impact of intensity and diversity of experiences. International Business Review, 27(1), 102–112.

    Google Scholar 

  • Jiménez, A., Luis-Rico, I., & Benito-Osorio, D. (2014). The influence of political risk on the scope of internationalization of regulated Companies: Insights from a Spanish sample. Journal of World Business, 49(3), 301–311.

    Google Scholar 

  • Johanson, J., & Vahlne, J. E. (2009). The Uppsala internationalization process model revisited: From liability of foreignness to liability of outsidership. Journal of International Business Studies, 40(9), 1411–1431.

    Google Scholar 

  • Jonsson, A., & Foss, N. J. (2011). International expansion through flexible replication: Learning from the internationalization experience of IKEA. Journal of International Business Studies, 42(9), 1079–1102.

    Google Scholar 

  • Keillor, B. D., & Hult, G. (2004). Predictors of firm-level political behavior in the global business environment: An investigation of specific activities employed by US firms. International Business Review, 13(3), 309–329.

    Google Scholar 

  • Kim, J. (2008). Corporate lobbying revisited. Business and Politics, 10(2), 1–23.

    Google Scholar 

  • Kobrin, S. J. (1979). Political risk: A review and reconsideration. Journal of International Business Studies, 10(1), 67–80.

    Google Scholar 

  • Kostova, T., Roth, K., & Dacin, M. T. (2008). Institutional theory in the study of multinational corporations: A critique and new directions. Academy of Management Review, 33(4), 994–1006.

    Google Scholar 

  • Lawton, T., McGuire, S., & Rajwani, T. (2013a). Corporate political activity: A literature review and research agenda. International Journal of Management Reviews, 15(1), 86–105.

    Google Scholar 

  • Lawton, T., Rajwani, T., & Doh, J. (2013b). The antecedents of political capabilities: A study of ownership, cross-border activity and organization at legacy airlines in a deregulatory context. International Business Review, 22(1), 228–242.

    Google Scholar 

  • Li, Y., Peng, M. W., & Macaulay, C. (2013). Market-political ambidexterity during institutional transitions. Strategic Organization, 11(2), 205–213.

    Google Scholar 

  • Lovas, B., & Ghoshal, B. (2000). Strategy as guided evolution. Strategic Management Journal, 21(9), 875–896.

    Google Scholar 

  • Luo, Y. (2001). Toward a cooperative view of MNC-host government relations: Building blocks and performance implications. Journal of International Business Studies, 32(3), 401–419.

    Google Scholar 

  • Lux, S., Crook, T. R., & Woehr, D. J. (2011). Mixing business with politics: A meta-analysis of the antecedents and outcomes of corporate political activity. Journal of Management, 37(1), 223–247.

    Google Scholar 

  • March, J. G. (1991). Exploration and exploitation in organizational learning. Organization Science, 2(1), 71–87.

    Google Scholar 

  • Mellahi, K., Frynas, J. G., Sun, P., & Siegel, D. (2016). A review of the nonmarket strategy literature: Toward a multi-theoretical integration. Journal of Management, 42(1), 143–173.

    Google Scholar 

  • Mena, S., & Palazzo, G. (2012). Input and output legitimacy of multi-stakeholder initiatives. Business Ethics Quarterly, 22(3), 527–556.

    Google Scholar 

  • Miles, M. B., & Huberman, A. M. (1984). Qualitative data analysis: A sourcebook of new methods. Thousand Oaks: Sage Publications.

    Google Scholar 

  • Mintzberg, H., & Waters, J. A. (1985). Of strategies, deliberate and emergent. Strategic Management Journal, 6(3), 257–272.

    Google Scholar 

  • Ocasio, W. (1997). Towards an attention-based view of the firm. Strategic Management Journal, 18(S1), 187–206.

    Google Scholar 

  • Oliver, C. (1991). Strategic responses to institutional processes. Academy of Management Review, 16(1), 145–179.

    Google Scholar 

  • Oliver, C., & Holzinger, I. (2008). The effectiveness of strategic political management: A dynamic capabilities framework. Academy of Management Review, 33(2), 496–520.

    Google Scholar 

  • Orr, R. J., & Scott, W. R. (2008). Institutional exceptions on global projects: A process model. Journal of International Business Studies, 39(4), 562–588.

    Google Scholar 

  • Peng, M. W. (2003). Institutional transitions and strategic choices. Academy of Management Review, 28(2), 275–286.

    Google Scholar 

  • Puck, J. F., Rogers, H., & Mohr, A. T. (2013). Flying under the radar: Foreign firm visibility and the efficacy of political strategies in emerging economies. International Business Review, 22(6), 1021–1033.

    Google Scholar 

  • Rajwani, T., & Liedong, T. A. (2015). Political activity and firm performance within nonmarket research: A review and international comparative assessment. Journal of World Business, 50(2), 273–283.

    Google Scholar 

  • Regnér, P., & Edman, J. (2014). MNE institutional advantage: How subunits shape, transpose and evade host country institutions. Journal of International Business Studies, 45(3), 275–302.

    Google Scholar 

  • Rhee, J. H., & Cheng, J. L. (2002). Foreign market uncertainty and incremental international expansion: The moderating effect of firm, industry, and host country factors. Management International Review, 42(4), 419–439.

    Google Scholar 

  • Rugman, A., & Verbeke, A. (1993). Generic strategies in global competition. In A. Rugman & A. Verbeke (Eds.), Research in Global Strategic Management (Vol. 4, pp. 1–18). Greenwich, CT: JAI Press.

    Google Scholar 

  • Salvato, C. (2003). The role of micro-strategies in the engineering of firm evolution. Journal of Management Studies, 40(1), 83–108.

    Google Scholar 

  • Saner, R., Yiu, L., & Sondergaard, M. (2000). Business diplomacy management: A core competency for global companies. Academy of Management Executive, 14(1), 80–92.

    Google Scholar 

  • Scherer, A. G., Rasche, A., Palazzo, G., & Spicer, A. (2016). Managing for political corporate social responsibility: New challenges and directions for PCSR 2.0. Journal of Management Studies, 53(3), 273–298.

    Google Scholar 

  • Schuler, D. A., Rehbein, K., & Cramer, R. D. (2002). Pursuing strategic advantage through political means: A multivariate approach. Academy of Management Journal, 45(4), 659–672.

    Google Scholar 

  • Schwab, K. (2011). The Global Competitiveness Report 2011–12. Geneva: World Economic Forum.

    Google Scholar 

  • Shirodkar, V., & Mohr, A. T. (2015). Explaining foreign firms’ approaches to corporate political activity in emerging economies: The effects of resource criticality, product diversification, inter-subsidiary integration, and business ties. International Business Review, 24(4), 567–579.

    Google Scholar 

  • Siegel, J. (2007). Contingent political capital and international alliances: Evidence from South Korea. Administrative Science Quarterly, 52(4), 621–666.

    Google Scholar 

  • Sun, P., Mellahi, K., & Wright, M. (2012). The contingent value of corporate political ties. The Academy of Management Perspectives, 26(3), 68–82.

    Google Scholar 

  • Teece, D. J. (2007). Explicating Dynamic Capabilities: The Nature and Microfoundations of (Sustainable) Enterprise Performance. Strategic Management Journal, 28(13), 1319–1350.

    Google Scholar 

  • Vahlne, J. E., & Jonsson, A. (2017). Ambidexterity as a dynamic capability in the globalization of the multinational business enterprise (MBE): Case studies of AB Volvo and IKEA. International Business Review, 26(1), 57–70.

    Google Scholar 

  • Vernon, R. (1971). Sovereignty at Bay. New York: Basic Books.

    Google Scholar 

  • Weick, K. E. (1995). Sensemaking in organizations (Vol. 3). Thousand Oaks: Sage Publications.

    Google Scholar 

  • Welch, C., Piekkari, R., Plakoyiannaki, E., & Paavilainen-Mäntymäki, E. (2011). Theorising from case studies: Towards a pluralist future for international business research. Journal of International Business Studies, 42(5), 740–762.

    Google Scholar 

  • Welge, M. K., & Holtbrugge, D. (2006). Internationales management (4th ed.). Stuttgart: Schaffer-Poeschel.

    Google Scholar 

  • Westermann-Behaylo, M. K., Rehbein, K., & Fort, T. (2015). Enhancing the concept of corporate diplomacy: Encompassing political social responsibility, international relations and peace through commerce. Academy of Management Perspectives, 29(4), 387–404.

    Google Scholar 

  • White, G. O., Boddewyn, J. J., & Galang, R. M. N. (2015). Legal system contingencies as determinants of political tie intensity by wholly owned foreign subsidiaries: Insights from the Philippines. Journal of World Business, 50(2), 342–356.

    Google Scholar 

  • Winter, S. G. (2003). Understanding dynamic capabilities. Strategic Management Journal, 24(10), 991–995.

    Google Scholar 

  • Wöcke, A., & Moodley, T. (2015). Corporate political strategy and liability of foreignness: Similarities and differences between local and foreign firms in the South African Health Sector. International Business Review, 24(4), 700–709.

    Google Scholar 

  • Wright, M., Filatotchev, I., Hoskisson, R. E., & Peng, M. W. (2005). Strategy Research in Emerging Economies: Challenging the Conventional Wisdom. Journal of Management Studies, 42(1), 1–33.

    Google Scholar 

  • Yasuda, N., & Mitsuhashi, H. (2017). Learning from Political Change and the Development of MNCs’ Political Capabilities: Evidence from the Global Mining Industry. Management International Review, 57(5), 749–774.

    Google Scholar 

  • Yin, R. K. (2009). Case study research: Design and methods (4th ed.). Los Angeles: Sage Publications.

    Google Scholar 

Download references

Author information

Authors and Affiliations

  1. Department of Management and International Business, The University of Auckland Business School, Auckland, New Zealand

    Ziad F. Elsahn & Maureen Benson-Rea

Authors
  1. Ziad F. Elsahn
    View author publications

    You can also search for this author in PubMed Google Scholar

  2. Maureen Benson-Rea
    View author publications

    You can also search for this author in PubMed Google Scholar

Corresponding author

Correspondence to Ziad F. Elsahn.

Rights and permissions

Reprints and permissions

About this article

Check for updates. Verify currency and authenticity via CrossMark

Cite this article

Elsahn, Z.F., Benson-Rea, M. Political Schemas and Corporate Political Activities During Foreign Market Entry: A Micro-process Perspective. Manag Int Rev 58, 771–811 (2018). https://doi.org/10.1007/s11575-018-0350-6

Download citation

  • Accepted:

  • Published:

  • Issue Date:

  • DOI: https://doi.org/10.1007/s11575-018-0350-6

Keywords

Search

Navigation