Business, Society and Politics: Volume 28

Amjad Hadjikhani is a Professor of Marketing at the Department of Business Studies, Uppsala University. His research interests cover different fields of industrial, consumer and international marketing. He has published several books and articles in different scientific journals. In addition to the membership of editorial boards of a number of international journals he has also acted as special guest editor for several international scientific journals, such as IBR, JBR and IMM.

Siavash Alimadadi is a PhD candidate at the Department of Business Studies, Uppsala University. His research focuses on the role of knowledge and trust in the internationalization process. His current research examines the impact of socio-political actors on MNCs in Turkey.

The dramatic developments in political, economic and commercial environments in the last two decades have had a significant impact on all aspects of our life. These developments include the emergence of developing countries as formidable partners in the global commercial scene and interdependence between most countries leading to increased cross-border business activities. Other than bringing countries closer, these developments also brought political, social and commercial sectors closer to each other.

An unprecedented economic growth and higher market uncertainty in emerging markets combined with increasing interdependence among the world economies serves as a base for this book. Contributing authors explore the behaviour of MNCs in these varied highly distinctive markets. The chapters are constructed on the thoughts that business in emerging markets is strongly embedded in the demands from society and political systems. We present thoughts and notions on interconnection between the three sectors: business, society and politics and how MNCs are managing this interaction. Compared to developed countries, authors believe that markets in emerging countries are constructed on a higher level of uncertainty due to (a) higher level of overlap and complexity in social and political systems, (b) higher level of dynamism, (c) higher level of unpredictable and critical changes in socio-political environment, (d) higher level of heterogeneities among different emerging countries. The complex interactions between these characteristics are viewed by the authors to differentiate MNCs’ management behaviour in these markets.

The effort in this chapter is to capture some of the relationships between the three pillars in emerging markets. It is an attempt to endow with knowledge on how MNCs manage their business, social and political relationships in emerging markets. The theoretical and empirical facts are to aid understanding of the differences between developed and emerging countries. Further, the discussions express on the heterogeneity and how the three pillars vary in between the emerging countries. The extensive difference in between these countries, the vital role of social and political relationships together with the rapid development and less developed institutional regulations is explained to challenge the MNCs when managing their businesses. The chapter affirms the weakness in the existing theoretical views and claim for the need for development of new theoretical views adapted for these economies.

The chapter explores factors that help define ‘socially responsible value chains’, in which firms create and deliver goods and services that provide social and economic value, but minimize negative externalities, operate in environmentally and socially sustainable ways, and address the concerns of all stakeholders. We use the case method to capture nuances of complex value-chain relationships extending into the unfamiliar territory of emerging markets. We chose three cases, involving Apple, Nike and Nestle, which have become landmarks in corporate responsibility policy and practice. We identify fundamental questions pertaining to social responsibility that arise when firms’ value chains extend across countries and deep into the bottom of the pyramid, and discuss how information gaps, institutional environment and socio-political actors affect outcomes. The chapter provides value by defining the role of governments, inter-governmental organizations, NGOs and managers in creating socially responsible value chains, and laying out specific recommendations.

A proactive stakeholder approach by a multinational firm is explored as regards to the ways to choose and influence key political, social and business actors in a market. The stakeholders are assessed in terms of their power, legitimacy and urgency of action as well as degree of their support of the firm's market entry. The study is based on the case study of IKEA entering Russia and China, composed of 44 in-depth interviews with managers and suppliers. The results suggest that during its market entry, a firm chooses those local stakeholders that can provide it with the most support and activates them with participative roles. This approach allows it to successfully alter the market context and create the win-win situation for itself and local actors. The study suggests a novel stakeholder classification into reactive (resistant), passive, reactive (supportive) and proactive types, contributing to stakeholder and marketing strategy research.

We aim at providing a more precise differentiation of external stakeholder pressures and their impact on multinational corporation (MNC) subsidiaries’ political strategies. Thus, we analyse whether external stakeholder pressures entail a more intense use of political strategies, and whether pressures from public stakeholders are more influencing compared to pressures from private stakeholders. We use ordinary least squares (OLS) regression analysis to test our hypotheses with data from 157 subsidiaries in Brazil, Russia, Turkey, India, China and South Africa. We found that the higher external stakeholder pressures on the MNC subsidiary, the more intensely subsidiaries apply political strategies. Furthermore, both public and private stakeholder pressures affect political strategies in a positive way, but our results show no statistical significance for a difference in impact. The study differentiates the general concept of external stakeholder pressures into pressures from national public and national private stakeholders.

The management of international business activities today necessarily includes the market communication of socio-political activity in emerging markets. Critique of market communication of socio-political activity in emerging markets varies from seeing it as something organisations say rather than do to suggesting existing market communication as embracing a simplistic view of communication and socio-political activity in emerging markets. In this chapter, communication and language as social practice is introduced as a possible way to explore market communication and socio-political activity in emerging markets as part of a more complex activity. Various perspectives from philosophical and sociological traditions are used in combination with marketing and management views on and empirical examples of communication and socio-political activity in emerging markets. This chapter illustrates how market communication may be seen as socio-political activity in emerging markets rather than the audit and report of it.

This paper examines the role of firm capabilities, psychic distance and choice of country risk variables in the entry mode decision between developed and emerging countries. The conceptual model extends previous studies built on gravity models by considering the potential effect of colonial ties on the entry mode. The empirical test applies an ordered logit model on a survey sample of 462 Portuguese firms. A subsample of 143 firms with internationalisation in the former Portuguese colonies was rerun to be compared with the total sample results. The findings suggest that firm capabilities maintain their importance in the presence of colonial ties, whereas psychic distance and perceived risk seem to be distorted or absent from the decision process of the market entry.

This study investigates how firms can influence political actors on emerging markets through their network partners in order to support a market-driving strategy. On emerging markets, political actors typically play a more central role than is the case on mature western markets. However, most firms do not have the understanding of or influence upon political actors in emerging markets that is required to interact with them directly. Consequently, gaining the support of different network partners will be essential. We discuss how network collaborators may manage political factors in order to influence four different dimensions of the market-driving strategy. We have conducted in-depth case studies of two Swedish firms and their activities in India. Based upon this we develop a conceptual model and discuss how a firm can collaborate with partners in order to influence political actors proactively as well as to reactively reduce harmful effects of political decisions.

Literature on internationalization focuses widely on the challenges that firms face when entering new countries, leaving an opportunity to understand the role of the home country and the exchange of emerging multinational enterprises (EMNEs) with local politicians. We argue that, in the case of EMNEs, nurturing political connections with the home country government is an important driver of internationalization. We use publicly traded Brazilian firms and data covering 2006–2009, comprising years before and after the 2006 election. We measure political connections through corporate financial contribution to candidates in the 2006 election. We find that politically connected firms show greater levels of internationalization than their non-connected counterparts when comparing before and after the election. Our results suggest that EMNEs pursue connections with political actors within their home country's institutions in order to reinforce their international position.

In this chapter one of few studies made of banks’ internationalization process in emerging markets, focusing on behaviour relating to the political environment is presented. Aiming to understand banks’ behaviour in the Russia, an analytical framework built on the internationalization process model incorporating the impact of political environment is developed. The empirical data in the chapter concern Sweden's four largest banks’ expansion into the Russian market and is presented in form of an longitudinal cross-case study with secondary data between years 1990 and 2010, collected retrospectively. The secondary data consist of newspaper articles, annual reports and press releases. Findings show that in stable periods, Swedish banks have followed the pattern of the internationalization process model when expanding into the Russian market. In periods of instability, the banks’ behaviour is heterogenic and can be opportunistic or cautious.

This chapter examines the role of national governments in the evolution of power relationships in multinational companies. The empirical study is based on a longitudinal analysis (2000–2011) of the EADS Group (European Aeronautic Defence and Space Company), which resulted from the merger of French company Aérospatiale-Matra, German company DASA and Spanish company CASA. The analysis focuses on the impact of national governments that were involved in the creation of EADS and national governments of emerging economies which have become priority markets for the company. The findings show that the political context has strongly influenced the balance of power within the EADS group.

This chapter deals with firms’ relationships in particular with political actors when expanding in emerging markets. Our main purpose is to illustrate the importance of including such relationships when describing how firms develop insidership in networks in these markets. Emerging markets are often described as if they pose similar challenges but we will focus on the heterogeneity and how firms handle the diversity of the non-business foreign environment. Based on experiences from three Western multinationals — Sandvik, Ericsson and ABB — the main challenges in China, South Africa and Turkey are described. In addition to relationships with political actors, the discussion indicates the importance of also including other non-business actors, such as NGOs. The cases also illustrate that knowledge acquired in one cultural setting may not easily be transferred to another since the contexts are so different.

The question under the focus is how an MNC manages the increasing demands for corporate social responsibility when entering and expanding in a market. Based on business network, the study develops a view highlighting the four concepts of learning, commitment, legitimacy and trust for studying of socio-political relationships. The view is employed for analysis of the experiences of a Korean MNC's entry into the Chinese market. The case illustrates that the Korean MNC, Samsung Electronics, has behaved proactively by large commitment in several long- and short-term projects towards the society. Besides the theoretical view, the study contributes new knowledge on how the MNC's activities have enabled the firm to transfer learning, commitment, legitimacy and trust from socio-political relationships to business relationships. Further, it adds new knowledge on how corporate social responsibility plays a critical role in a successful entry, thereby building up a stable market position.

This chapter explores socio-political networks and cross-sectoral co-operation in the context of solving environmental problems in an emerging economy: Russia. The aim is to shed light on key success factors of cross-border co-operation involving public, business and third-sector actors. The case study on protecting the Baltic Sea analyses a Western–Russian partnership between a Finnish non-governmental organisation and a Russian water utility and its embeddedness in business and socio-political networks. We conclude that key factors of success in this case were the successful timing of the NGO's initiative, the historic platform of Finnish-Russian co-operation in the area of clean water, and the gradual building of the actors’ social networks and legitimacy. The chapter contributes to the embryonic area of CSR studies in the emerging market context and extends the legitimation, trust-building and commitment model (Hadjikhani, Lee, & Ghauri, 2008) to the context of CSR in contemporary Russia.

Based on the findings in earlier research of the importance of relationships in general, and relationships to social actors in particular to explain innovation processes in emerging economies, the aim of the paper is to reach a better understanding of the mechanisms behind innovations in these economies. This has been accomplished through an investigation of an innovation process and the relationships between two business firms and a NGO that were central for its progression. Theoretically the study is constructed on the concepts of trust, commitment and cultural capability in long and short-term relationships as discussed in business network theory and theory on discontinuous innovation. A case study method is used and the social innovation project ‘Connexão Belterra’ that enabled connectivity in the distant Amazon region of Pará, Brazil, was investigated.

This chapter, against studies on success history, puts its attention on the firm's behaviour facing a critical socio-political problem. The specific question is how the relationship between business and socio-political actors in an emerging market under a scandal develops and how these actors manage such a situation. To reach this aim the study concerns with the Roche Scandal in Turkey and discusses the reactions of business and socio-political actors before and after the scandal, and further, how Roche subsequently managed these relationships. The theoretical framework for analysis of the Roche Turkey Scandal is constructed on relationship elements of trust, legitimacy and learning. The analysis provides some answers to the question of how Roche Turkey in the face of reactions given by the network actors managed the aftermath of the scandal and how the legitimacy loss was recovered by learning and adaptation. Conclusions enhance our knowledge on the behaviour of firms under critical condition.

The aim of this chapter is to describe and discuss the growing intersection of roles and functions between states and multinationals in the field of diplomacy and how diplomatic skills are needed to support transnational companies in their search for markets in emerging countries. Transnational enterprises face multi-stakeholder engagements in the BRICS and increasingly employ techniques and strategies similar to the repertoire of tools used by diplomats and foreign affairs departments. Given the rapidly changing international business environment, we can observe the emergence of private commercial diplomacy. This chapter provides a detailed analysis of these new developments and seeks to explore the negotiations between multinational corporations and states, between multinationals and other stakeholders (local authorities, traditional leaders, NGOs etc.) and between multinationals. This analysis will focus on multinationals in emerging countries (Brazil, Russia, India, China).