Effective Nonmarket Strategies: A Model of Political Capabilities

This proposal focuses on the firms’ political capabilities as the major determinant to effectiveness of their nonmarket strategy. The term “nonmarket strategy” is relatively young and was primarily coined by Baron (1995) referring to the fact that a firm has to establish a particular knowledge and competencies in order to address its non-business environment, which includes the public, the media, politicians or regulatory authorities and other stakeholders. Naturally, politicians and regulatory authorities play an outstanding role in the firm’s environment as they could significantly influence financials or strategic discretion by means of public policy. These political capabilities in the organization build an advantage outside the firm’s business focus that prevents competitors to enter the market. If competitors do not possess these capabilities they will find it costly to duplicate the nonmarket skills (Bonardi, Hillman & Keim 2005, Bonardi, Holburn & Vanden Bergh 2006). Alternatively to the term of nonmarket strategy, authors refer to the ability of corporations to manage institutional idiosyncrasy (Hensiz, 2003), strategic political management (Oliver & Holzinger, 2008) or corporate political activities (Hillmann & Hitt, 1999).