Balancing social and political strategies in emerging markets: Evidence from India

• Date: 01 January 2019
• DOI: http://doi.org/10.1111/beer.12206
• Author: Zaheer Khan,Svetla Marinova,Rekha Rao‐Nicholson
• Published date: 01 January 2019

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  wileyonlinelibrary.com/journal/beer Busines s Ethics: A Eur Rev. 2019; 28:56 –70 .

© 2018 John Wiley & So ns Ltd

1 | INTRODUCTION

In this articl e, we examine the im pact of politic al and social str ate-

gies on firm per formance in the conte xt of emerging market s (EMs)—

utilizing the cont ext of one of the largest E M of India. Recently, there

has been an incre asing interest in unde rstanding the dri vers and out-

comes of politic al and social strategies (e.g., Fr ynas, Child, & Tarba,

2017; Frynas & Stephens, 2015; M ellahi, Frynas, S un, & Siegel, 2016).

Political st rategies consist of engage ment with policymake rs, target-

ing these stakeholders via constituency building, sharing informa-

tion and finan cial resources (Hillman & Wan , 2005). Social strate gies

include activities directed toward ethical management and respon-

sible engageme nt with the business contex t (Clarkson, 1995, Gupta,

Briscoe, & Hamb rick, 2017; Li, Xia, & Zajac, 2018).

Given the growing i nterest in this topic (cf. Holtbrüg ge, Berg, &

Puck, 2007, Mellahi et al ., 2016; Puck, Rogers, & Mohr, 2013), schol-

arly investiga tions in this area a re relatively un derdevelope d and frag-

mented. Most of th e studies on politi cal strategies (L awton, Mcguire ,

& Rajwani, 2013) and so cial strategies (Aguinis & G lavas, 2012) are

conducted in is olation and scholars h ave called for the integr ation of

these two str ands of researc h (Frynas & Stephen s, 2015; McWilliams,

Fleet, & Cor y, 2002; Mellahi et al. , 2016). The current lack of inte -

gration of polit ical and social s trategies rese arch means that th ere

is limited under standing of comp lementar y or substitutio n effects

between the p olitical and so cial strategies (c f. Leidong, Rajwa ni, &

Mellahi, 2017; Mellahi et a l., 2016). In the context of EMs, ext ant lit-

erature has exa mined the different t ypes of political a nd social strat-

egies used by foreign companies in those markets, mainly focusing

on the determin ants of such strategies r ather than on the outcomes

(Hillman & Hitt , 1999; Hillman, Keim, & Sch uler, 2004; Meznar &

Nigh, 1995; Oliver & Holzinge r, 2008). Oliver and H olzinger (2008)

highlight how non‐market strategies r ather than market ones c an be

sources of firm co mpetitive advant age. The implement ation of politi-

cal strategi es can impact firm out comes. For example, it ca n achieve

favorable legis lative decisions (Lord, 200 0), generate higher market

capitalizat ion (Hillman, 2005), improve the f irm value in stock m ar-

kets (Goldman , Rocholl, & So, 2009), lead to en hanced financial per-

formance (Shaf fer, Quasney, & Grimm, 200 0), and decrease busi ness

risk (Puck et al., 2013). Yet, t here is limited work exploring t he links

between soci opolitical strategi es and their influence on fi rm perfor-

mance in EMs (e.g., Fr ynas & Stephens, 2015; H adani & Coombes ,

2015; Leidong et al., 2 017).

Though above and s everal other stu dies have provided im port-

ant insights into t he antecedents of p olitical and so cial strategie s

(cf. Frynas et al., 2017; Mellah i et al., 2016), however, majority of the

work has been cond ucted in developed markets an d scholars have

Received: 9 Augu st 2017 

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  Revised: 14 May 2018 

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  Accepted: 22 Augus t 2018

DOI: 10 .1111/bee r.12206

ORIGINAL ARTICLE

Balancing social and political strategies in emerging markets:

Evidence from India

Rekha Rao‐Nicholson1 | Zaheer Khan2 | Svetla Marinova3

1Newcastle University London, London,

United Kingdom

2Kent Business S chool, Universit y of Kent,

Canterbury, United Kingdom

3International Business and

Marketing, Aalborg University, Aalborg,

Denmark

Correspondence

Rekha Rao‐Nicholson , International Business,

Newcastle U niversity Lo ndon, 102 Middle sex

Street, Lon don E1 7EZ, United King dom.

Email: rekha.nicholson@newcastle.ac.uk

Abstract

This article exp lores the substitu tion and complement ary effec ts between polit ical

and social strateg ies on firm performance in th e context of an emerging market (EM).

Using in‐depth, historic al case‐study a pproach, the ar ticle investigates h ow companies

integrate politica l and social resources in t his market. Corporate p erformance includ es

traditional mea sures, such as accounting per formance and nonfinancial me asures like

the ease of doing busine ss. The study finds that s ocial strategies are str onger enablers

of firm long‐term per formance than political strate gies. The latter have a short‐term

impact on per formance, but their success over time is limite d. The main drawback of

reliance on politic al resources in EMs is the lack of po litical stabilit y, fragmented polity,

and weak political co alitions. We identify rather lim ited evidence of firms using these

two strategies as co mplements. Thus, we su ggest that firms shoul d employ both these

strategies in the EM .