College of Business and Economics

Department of Management

PhD In International Business and Strategy

Non Marketing Strategy (MGMT – IBS 724 ) Course

Individual Assignment on

Examining the Role of Non Market Factors across Different Substantive Public Policy Areas of
Concern to Firms

Dr. Workneh Kassa (Associate Professor)

Tesfamaryam Assefa Addis Ababa University
ID: GSR/4824/16
1
March,2024
Determinants of Nonmarket Strategies of Business Firms
A country-based, comparative Perspective

Seeringer, A. (2016). Determinants of nonmarket strategies of

business firms: A country-based, comparative Perspective. Technische
Universitaet Berlin (Germany).

AAU, International Business Environment, PhD Course,

2
Ethiopia L. Segaro (D.Sc.)
 Introduction
 Baron defines the nonmarket environment as including those interactions “that are
intermediated by the public, stakeholders, government, the media, and public
institutions.
 Business firms do not act in a “vacuum”; they act embedded in a legal and socio-
political environment. Furthermore, “interactions in the nonmarket environment
may be involuntary
 It is useful for business firms to consider the nonmarket or political environment,
and there are many opportunities for them to engage in that environment:
lobbying, political action committees (PAC), coalition building, litigation, and
petitioning.
 Explanations for firms’ determinants in nonmarket involvement can be found in
the disciplines of economics, political science, sociology, organizational theory,
and strategic management, using various different theories.
 the thesis aims to develop an integrated, multi-theoretical "driver model" to
explain the determinants of firms' engagement in nonmarket strategies across
different countries.
Problem of the statement

As Frynas et al. (2015) indicate, the research in the area of NS has “largely
suffered from the failure to integrate insights and methodologies from political
science, legal studies, sociology, history and other related disciplines;
And, the current literature is heavily focused on the US, while analyses from
other regions (Europe, Asia, and Latin America) are scarce.
 There is a need for an integrated, multi-theoretical framework to explain the
determinants of firms' engagement in nonmarket strategies across different
countries, going beyond the traditional focus on the market environment in
strategic management research.
…cntd
Thus then, there is a gap in:
The literature does not encompass theoretical substantiation;
 There is a lack of an overarching framework;
There is scarce integration of aspects from the field of strategic management;
and
There is scarce empirical work in Europe, with most studies focusing on the
US.
Why it is important NS?

This encompasses all benefits stemming from the nonmarket environment, such
as gathering information about processes in the political, regulatory, and
standardizing environment, and about the society and interest groups to reduce
uncertainty and consider (further) NS;

furthermore, it comprises benefits from new laws, regulations, subsidies, and tax
cuts, as well as benefits from hindering the political environment to change rules.
Research Methodology

Research design:
 Systematic review was pursued
 The literature review covered papers published in academic journals between
1990 and 2010.
 qualitative systematic management review
Data collection
 Relevant publications were identified using specific keyword search in their title
or abstract in EBSCO host.
• preliminary database search was conducted
Sample size determination and sampling
 Over several search steps, 720 article were discovered
 42 empirical studies
…contd

Inclusion and exclusion criteria

1. selecting by title;
2. selecting by abstract;
3. selecting by text; and
4. including additional papers via cross-referencing (revoking the time
filter).
This procedure resulted in a sample of 108 publications
Methodology: Analysing NS
Theoretical and Empirical literature review

Theoretical Review:
The study draws on various theories from different disciplines to
explain firms' determinants for engaging in nonmarket strategies,
including:
1. Resource-based view (RBV) of the nonmarket environment
2. Institutional theory
3. Behavioral theory of the firm
4. Resource dependence theory
5. Collective action theory
6. Interest group/stakeholder theory
7. Life cycle model of public policy management
…cntd

Empirical Review:

The study develops a comprehensive "Driver Model" that identifies three main
categories of determinants of firms' nonmarket strategies:
Internal, access-related drivers (e.g. firm size, ownership, resources, experience)
External drivers (e.g. regulation, controlled resources, political system, industry
concentration, unionization)
Issue-related drivers (based on the life cycle of public policy issues)
In General, the study takes a multi-theoretical and comparative country-based
approach to develop and empirically examine a comprehensive framework for
understanding the drivers that shape firms' engagement in nonmarket strategies
Theories
… cntd
All 143 variables185 deducted from 42 empirical studies that explain the
determinants of firms’ engagement in NS could be grouped into 12 so-called
antecedents.

(Firm Size, Origin of Firm, Internal Resources & Structure, Experience with NS,
Level of Regulation, Dependence on Controlled Resources, Governmental
Purchases, Political System, Industry Concentration, Unionization, External
Pressures, Issue).
The Three Perspectives of the Driver Model Connected to the Research Field of Strategic
Management
Drive conceptual model
Conceptual frame work

Internal, Access-related Drivers:

1. Legitimacy-related drivers (firm size, ownership)
2. Reputation-related drivers (internal resources, structure, experience with
nonmarket strategies)
External Drivers:
3. Institutional factors (regulation, controlled resources, governmental
purchases/contracts, political system)
4. Industry and societal factors (industry concentration, unionization, external
pressures)
… cntd

Issue-related Drivers:
1. Based on the life cycle model of public policy management (LCM)
2. Firms' engagement varies across the different stages of an issue's life cycle
• The conceptual framework proposes that firms' nonmarket strategies
are shaped by this combination of internal, access-related factors,
external environmental factors, and the specific characteristics of the
public policy issues they face.
Results (Major Findings) of the Study

Proposition 1: Firms’ engagement in NS is higher if firms are in compliance with

the institutional environment (origin of the firm) and cater to societal goals
(employment).
The relationship between the firm’s engagement in NS and their compliance with
the institutional environment is not always straightforward due to the changing
nature of the institutional environment. However, firm size with regard to
employment is confirmed as an antecedent of firm’s engagement in NS.
Proposition 2: Firms’ internal resources and structures (political resources) and
firms’ experience in dealing with the nonmarket environment determine firms’
engagement in NS.
Specific firm factors such as size and financial resources are identified as
antecedents of NS. Experienced firms are perceived to have a higher engagement
level in the nonmarket environment.
…cntd

Proposition 3: The dependence on resources (e.g. regulations and governmental

purchases) determines firms’ engagement in NS.
The dependence on resources controlled by the government and the degree of industry
regulation are identified as antecedents of firms’ engagement in NS.
Proposition 4: The socio-political environment (political system) of a firm determines
the kind and level of its engagement in NS.
The characteristics of the socio-political environment are identified as crucial for firms’
opportunities to pursue NS. Differences between political systems influence firms’
engagement in NS.
Proposition 5: The concentration of the industry and cost-benefit considerations
related to firm size determine firm’s involvement in NS.
Although the theory suggests that larger firms in more homogenous industries tend to
be more engaged in NS, the interviews did not provide enough evidence to confirm this
proposition.
…cntd
Proposition 6: The (expected) behavior of actors in the same environment is
a predictor of firms’ engagement in NS.
Firms react to external pressures and movements in society, as well as the
behavior of competitors and interest groups, in their engagement in NS.
Proposition 7: The phase of a public policy in the political life cycle
determines the likelihood and the kind of NS chosen by firms.
The timing and selection of targets are considered crucial for effective
lobbying efforts, with a good lobbyist engaging in the early phases of the
policy life cycle.
Proposition 8: Changes in the environment (external stimuli) and in the
internal resource base (GAD, experience) determine when firms engage in the
nonmarket environment (crisis).
Not fully supported and thus dropped from the Driver Model.
Summary of major findings

1.Factors influencing firms' engagement in nonmarket strategies (NS):

compliance with institutional environments, internal resources and structures,
dependence on resources, socio-political environments, industry concentration,
and behaviors of actors in the same environment.
2.Importance of legitimacy: Firms that contribute to societal goals, such as
employment, education, and following laws and regulations, tend to enjoy
legitimacy and are more likely to engage in NS.
3.Adaptation to socio-political environments: firms adjusting their strategies to
align with the expectations of their respective environments.
…cntd

4. Timing and targeting in NS: Effective lobbying efforts require careful

consideration of timing and target selection, with engagement in the early phases of
the policy life cycle being crucial.
5. Response to external pressures and movements: Understanding and responding
to these external factors are important aspects of firms' NS strategies.
Discussion and Recommendations

The thesis aimed to develop a comprehensive model explaining firms'

engagement in nonmarket strategies (NS) in the US and Europe.
• The Driver Model represents a significant step towards building such a
framework, addressing the relationship between internal and external drivers
and firms' engagement in NS.
• It seeks to mitigate the fragmentation in the field by providing a unified
approach.
The Driver Model combines theories from strategic management and political
science to explain firm behavior in both market and nonmarket environments.
• It emphasizes the importance of internal resources, external drivers, and issue-
related factors in shaping firms' engagement in NS.
Theoretical, Methodological and Empirical Lessons

Theoretical Lessons:
It demonstrates the value of combining theories like the Resource-Based View
(RBV) and the Institutional Theory (IT) to provide a nuanced understanding of the
drivers of NS engagement.
The Driver Model is based on acknowledged theories and can from this point of
view provide a basis from which to develop an overarching framework.
…cntd

Methodological Lessons:
It discusses the challenges of conducting interviews and literature reviews across different
continents and underscores the importance of triangulating data sources to ensure validity
and reliability.
Empirical Lessons:
It identifies key factors driving firms' NS behavior, such as internal resources, external
pressures, and issue-related considerations. By analyzing empirical data from interviews
and literature reviews, the article sheds light on the complex dynamics shaping firms'
strategies in the nonmarket environment.
Researchers have (long) demanded an overarching framework to explain firms’ behavior
in the nonmarket environment.
Future research

develop new theories to substitute the borrowed ones (due to the small area of
research and the complexity of developing new theories, however, this remains
unlikely); or
 further support the concept of borrowing theories, e.g. with case studies or
empirical studies.
 Empirically testing and validating the proposed "Driver Model" through
survey-based data collection and statistical analysis.
 Developing a more robust empirical approach to studying the antecedents and
determinants of firms' nonmarket strategies.
 Further advancing an integrated strategic management perspective that
considers both the market and nonmarket environments facing businesses.
Thank you