Nonmarket Strategy In Business Organizations

Author : Jihyun Eun
Publisher :
ISBN 13 :
Total Pages : pages
Book Rating : 4.:/5 (127 download)

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Download or read book Nonmarket Strategy written by Jihyun Eun and published by . This book was released on 2019 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This dissertation focuses on the theme of nonmarket strategy. Nonmarket strategy involves managing corporate interactions with various types of stakeholders within social, political, and legal environments to achieve better performance. Firms are certainly social entities; they cannot stand alone without interdepending on government, customers, suppliers, employees, or the public. Thus, the core goal of this field is to improve such social interplays and satisfy these stakeholders, particularly in the form of corporate political activity (CPA) and corporate social responsibility (CSR). However, despite the theoretical and practical implications within this idea, some fundamental questions remain. First, what particularly encourages firms to actively pursue a nonmarket strategy? Second, does it really matter? Do firms really create value through nonmarket strategy? The primary goal of this dissertation is to answer these two fundamental questions. This dissertation consists of three essays. The first essay (Chapter 1), which was accepted and published online first at Business & Society, probes the conditions under which firms become motivated to pursue a nonmarket strategy, typically CPA. In particular, this study explores what factors affect diverse decision-making practices regarding lobbying engagement. By applying the aspiration concept and behavioral theoretical framework, this study argues that firms that fail to reach the performance level of the past self (historical aspiration) are more likely to actively pursue lobbying as a way to find solutions for such performance failure. On the other hand, this kind of tendency is reversed in the case of social aspiration; firms that fail to reach the performance level of their peers are less likely to pursue lobbying, given that the benefits from lobbying can spill over to other firms. The second essay (Chapter 2) explores the value-creation mechanism of CPA, particularly political contributions through a Political Action Committee (PAC). In general, PAC contributions are kept under a certain legal amount and do not involve the specific issues at hand. These characteristics often trigger doubts regarding the real benefits firms can attain by making such contributions. However, by testing the stock market returns around the proposal and passage of the Troubled Asset Relief Program (TARP) in the 2008 financial crisis, this study finds that investors actually hold political contributions in high regard. The third essay (Chapter 3) investigates the value-protection mechanism of CSR reputation. Extant research has suggested that corporate investment in CSR becomes particularly valuable when a firm encounters a reputational crisis. At the same time, however, the agency theory literature also suggests that CSR can backfire on firm value depending on the contexts, as CSR possibly signals the existence of sloppy management and opportunistic resource allocation by managers. Thus, this study tries to reconcile these contradicting theoretical perspectives and explore the real value of CSR by testing the effect of CSR in the context of financial misrepresentation. Interestingly, this study finds that CSR certainly has an insuring effect only when accompanied by a high level of managerial ownership.