Typology of business diplomacy in emerging economies

Document Type : Research

Authors

1 PhD Student, University of Guilan, Rasht, Iran

2 Associate Professor, University of Guilan, Rasht, Iran

3 Associate Professor, University of Guilan, Rasht, Irann

Abstract

   Introduction: Emerging economies Firms (EMFs) are unfamiliar actors in a new host market. Hence, foreign market entry should be studied more as a position-building process. Given that position-building process lead to tensions and conflicts among key EMF stakeholders. Business Diplomacy (BD) is a practices that facilitates this process. Therefore, the purpose of this research is the typology of BD in EMFs, based on their positioning-building process over period of time. Through the lens of Path-dependence Theory, we review the literature to formulate a typology of Business diplomacy, then we identify statistical control variables.
   Methodology: For the purpose of this study, we used Sequence Analysis to identify sequence patterns of BD in EMFs position-building process. Iran Exemplary Exporters in the period of 2012-2020 are chosen as the statistical population of this research that 36 Firms were studied as a sample based on the judgment criteria. Data were collected through the board of director's activity annual reports in Codal Database. Using TraMineR in R-package, data analyzed through optimal matching (OM).
   Results and Discussion: We empirically identify three different sequence patterns of business diplomacy. Firms in the Automotive, Petrochemical and Chemical Industries, Machinery and Equipment, Engineering Services, and the Paper Industry mainly follow first path. Firms operating in the Steel Industry, Automotive Industry, and Machinery and Equipment follow the second path. Firms operating in the Oil Industry, Steel Industry, Pharmaceutical Industry, Electrical Equipment and Paper industry follow the third path. The findings also show that business diplomacy pathways differ significantly in terms of firm's characteristics (i.e. industry, size, and international experience).
We argued that EMFs follow different BD strategies in their position- building process in the host markets. In the first pattern, the most of EMFs execute reactive and proactive strategies, and few Firms have follow other strategies. In this pattern, the dominant strategic priority is pay attention to the business related stakeholders, and the pressure dimension has insignificant effect on changing the strategy. Also, we argued that the Firms in the automotive, petrochemical and chemical industries, machinery and equipment, technical and engineering services, and paper industries use the one-best-way approach. The dominant strategy in the second pattern is proactive strategy. This strategy has become the dominant view of firms in last years, and the strategic agenda of firms has shifted from business-related stakeholders to none-business-related stakeholders. In addition, we argued that this turn to none-business-related stakeholders has significantly occurred in the steel, automobile manufacturing, and machinery and equipment industries.
   Conclusion: As a result, the contingency approach is prevailing in the second pattern. But the dominant strategy in the third pattern is defensive strategy. We argued that firms try to avoid unintended changes in the political environment, through defensive strategies, and manipulating none-business related stakeholders. In other word, they maximize profits in host markets through neutralize the non-market environment pressures. This turn to defensive strategy has been significantly occurred in the oil, steel, pharmaceutical, electrical equipment and paper industries. in addition, the results showed that firms in the automobile industry and machinery and equipment, simultaneously follow the first and second patterns, and firms in the paper industry simultaneously follow the first and third patterns, as well as firms in the steel industry follow the second and third patterns at the same time. To explain it more clearly, the dynamics of the environment exposes firms to continuous changes and companies may use strategies that conflict with each other. As a result, firms may follow a paradox approach. In nutshell, we argued that, firms by turn in strategic agenda from business related stakeholders to none-related stakeholders, facilitate their position-building process in host market. And this practice turn, influenced by Firms-level characteristics such as industry, size and international experience. Our research has implications from theoretical and methodological aspects: First, the existing research focused on advanced economy firms. But our research conducted in emerging economies context, which are very different from advanced economies context. Second, the results of this research have proposed a mechanism to overcome on emergingness liabilities. Third, the paradox approach in strategy emphasizes that in the complex and evolving world, firms faced with a heterogeneous environment and contradictory demands of business related and none-business related stakeholders. As a result, firms that follow the paradox approach in BD are more successful in creating and maintaining legitimacy. Fourth, the results of this research have confirmed the potential of quantitative research in process studies, especially in the strategy as practice area. In other words, identifying a pattern at the macro level through micro level data leads to the emergence of innovative insights that cannot be achieved only through a qualitative research design. Finally, some issues in management research, such as evolutionary view of strategy, require the analysis of sequence data; as a result, analyzing these data and identifying emerging patterns creates significant challenges, and traditional quantitative and qualitative researches suffer from this issue. Therefore, optimal matching approach has solved this challenge.
we empirically identify Three different sequence patterns of business diplomacy. Frims in the Automotive, Petrochemical and Chemical Industries, Machinery and Equipment, Engineering Services, and the Paper Industry mainly follow first path. Firms operating in the Steel Industry, Automotive Industry, and Machinery and Equipment follow the second path. Firms operating in the Oil Industry, Steel Industry, Pharmaceutical Industry, Electrical Equipment and Paper industry follow the third path. the findings also show that business diplomacy pathways differ significantly in terms of firm's characteristics (i.e industry, size, and international experience).

Keywords

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Journal of Strategic Management Studies
Volume 14, Issue 53
April 2023
Pages 107-124

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History

  • Receive Date: 15 September 2021
  • Revise Date: 24 October 2021
  • Accept Date: 12 February 2022

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