Aib business diplomacy in mn cs final

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  • 1. BUSINESS DIPLOMACY IN MNCs: AN EXPLORATORY STUDY HUUB RUEL – WINDESHEIM UNIVERSITY – The Netherlands TIM WOLTERS – UNIVERSITY OF TWENTE – The Netherlands RAYMOND LOOHUIS – UNIVERSITY OF TWENTE – The Netherlands CONTACT: HJM.RUEL@WINDESHEIM.NL
  • 2. Content o Presentation overview o Business diplomacy: tracking its roots o Business diplomacy: positioning within the literature and research question o Business diplomacy operationalization o Method o Results o Discussion, conclusion, future research 4-7-2013 2 Business Diplomacy in MNCs: An Exploratory Study Huub Ruel, Tim Wolters, Raymond Loohuis HJM.RUEL@WINDESHEIM.NL
  • 3. Presentation overview • Today’s complex international business environment requests from multinational corporations to be able to manage interactions with foreign governments and local and international NGO’s. • Business diplomacy is of major importance • Key question: How is business diplomacy enacted by and embedded in MNCs? • Method: qualitative, semi-structured interviews with 8 MNCs using a multi-dimensional operationalization of business diplomacy 4-7-2013 3 Business Diplomacy in MNCs: An Exploratory Study Huub Ruel, Tim Wolters, Raymond Loohuis HJM.RUEL@WINDESHEIM.NL
  • 4. The business diplomacy project so far 4-7-2013 4 Business Diplomacy in MNCs: An Exploratory Study Huub Ruel, Tim Wolters, Raymond Loohuis HJM.RUEL@WINDESHEIM.NL
  • 5. The business diplomacy project so far - November 2012, The Hague (The Netherlands): international research seminar on Business Diplomacy inviting scholars from the IB side and the IR side - Cfp was distributed via AIB listserv as well - Selection of about 10 papers/authors to The Hague - Upcoming special issue for The Hague Journal of Diplomacy (Spring 2014) - The current paper is part of project with a qual and a quant part4-7-2013 5 Business Diplomacy in MNCs: An Exploratory Study Huub Ruel, Tim Wolters, Raymond Loohuis HJM.RUEL@WINDESHEIM.NL
  • 6. Business diplomacy: tracking its roots 4-7-2013 6 Business Diplomacy in MNCs: An Exploratory Study Huub Ruel, Tim Wolters, Raymond Loohuis HJM.RUEL@WINDESHEIM.NL
  • 7. Business diplomacy: tracking its roots (1) • Concept of business diplomacy not widely used in the literature • Saner, Yiu, Sondergaard (2000) in Academy of Management Perspectives • “Business diplomacy management involves influencing economic and social actors to create and seize new business opportunities; working with rule-making international bodies whose decisions affect international business; forestalling potential conflicts with stakeholders and minimizing political risks; and using multiple international forums and media channels to safeguard corporate image and reputation”(Saner et al. p. 85). 4-7-2013 7 Business Diplomacy in MNCs: An Exploratory Study Huub Ruel, Tim Wolters, Raymond Loohuis HJM.RUEL@WINDESHEIM.NL
  • 8. Business diplomacy: tracking its roots (2) • Saner & Yiu (2005): “Business diplomacy pertains to the management of interfaces between the global company and its multiple non-business counterparts (such as NGOs, governments, political parties, media and other representatives of civil societies) and external constituencies” (p. 302). • London (1999): business diplomacy is a method of cooperating with people in an effective way to get things done. Business diplomacy uses tact and understanding to build up relationships and trust: • “Business diplomacy is most important when there are disagreements, interpersonal conflicts, and a lot at stake” (London, 1999, p. 171). 4-7-2013 8 Business Diplomacy in MNCs: An Exploratory Study Huub Ruel, Tim Wolters, Raymond Loohuis HJM.RUEL@WINDESHEIM.NL
  • 9. Business diplomacy: tracking its roots (3) • Our observation: Business diplomacy is considered to be important in today’s international business environment Lack of empirical research on how business diplomacy is executed by MNCs No clear definition and operationalization of business diplomacy 4-7-2013 9 Business Diplomacy in MNCs: An Exploratory Study Huub Ruel, Tim Wolters, Raymond Loohuis HJM.RUEL@WINDESHEIM.NL
  • 10. Business diplomacy: positioning and definition 4-7-2013 10 Business Diplomacy in MNCs: An Exploratory Study Huub Ruel, Tim Wolters, Raymond Loohuis HJM.RUEL@WINDESHEIM.NL
  • 11. Business diplomacy: positioning and definition Related concepts: • Corporate diplomacy (Ordeix-Rigo & Duarte, 2009), • Corporate political activity (CPA) (Hillman et al., 2004; Hansen and Mitchell, 2000), • Corporate political strategy (CPS) (Baron, 1997; Hillman, 2003; Hillman et al., 1999; Keim & Baysinger, 1988), • Strategic political management (SPM) (Oliver & Holzinger, 2008), • MNC global governance (Detomasi, 2007; Muldoon, 2005; Kourula & Laasonen, 2010), • MNC-Host government relations (Boddewyn & Brewer, 1994; Luo, 2001). 4-7-2013 11 Business Diplomacy in MNCs: An Exploratory Study Huub Ruel, Tim Wolters, Raymond Loohuis HJM.RUEL@WINDESHEIM.NL
  • 12. Business diplomacy: positioning and definition • Literature review 4-7-2013 12 Business Diplomacy in MNCs: An Exploratory Study Huub Ruel, Tim Wolters, Raymond Loohuis HJM.RUEL@WINDESHEIM.NL
  • 13. Business diplomacy: positioning and definition Business diplomacy definition: “Business diplomacy involves establishing and sustaining positive relationships (by top executives or their representatives) with foreign government representatives and non-governmental stakeholders (economic and non-economic) with the aim to build and sustain legitimacy (safeguard corporate image and reputation) in a foreign business environment”. 4-7-2013 13 Business Diplomacy in MNCs: An Exploratory Study Huub Ruel, Tim Wolters, Raymond Loohuis HJM.RUEL@WINDESHEIM.NL
  • 14. Business diplomacy: positioning and definition (3) 4-7-2013 14 Business Diplomacy in MNCs: An Exploratory Study Huub Ruel, Tim Wolters, Raymond Loohuis HJM.RUEL@WINDESHEIM.NL
  • 15. Business diplomacy: positioning and definition (4) 4-7-2013 15 Business Diplomacy in MNCs: An Exploratory Study Huub Ruel, Tim Wolters, Raymond Loohuis HJM.RUEL@WINDESHEIM.NL • Short-term focused • Aimed at influencing public policy outcomes in favor of the firm (in the home country, and increasingly in foreign countries) • Lobbying as mechanism (short-term, specific purpose) • Long-term focused •Aimed at building long-term positive relationships with foreign governments and all other stakeholders of the business (e.g. NGOs) • Creating legitimacy (safeguarding corporate image and reputation) for long-term business opportunities Corporate political activity (CPA) Business Diplomacy
  • 16. Research direction and question • Business Diplomacy is a relatively under-explored topic • Existing publications stress the importance of business diplomacy, but limited empirical evidence • It is not clear how corporations conduct business diplomacy in practice • Therefore: more empirical, exploratory work is needed. How is business diplomacy enacted by and embedded in MNCs? 4-7-2013 16 Business Diplomacy in MNCs: An Exploratory Study Huub Ruel, Tim Wolters, Raymond Loohuis HJM.RUEL@WINDESHEIM.NL
  • 17. Business diplomacy operationalization 4-7-2013 17 Business Diplomacy in MNCs: An Exploratory Study Huub Ruel, Tim Wolters, Raymond Loohuis HJM.RUEL@WINDESHEIM.NL
  • 18. Business diplomacy operationalization (1) Business diplomacy dimensions (6): • Intensity: the extent to which a company actively establishes and sustains positive relationships with foreign government representatives and non- governmental stakeholders • Policy clarity: the extent to which a company has a clear and organization –wide policy on how to establish and sustain relationships • Breadth: the extent to which establishing and sustaining these relationships is done by every company representative • Responsibility: the extent to which the company’s responsibility for BD lies with the HQ level or at the local foreign subsidiary. • Means deployment: the extent to which the company deploys a diversity of means for establishing and sustaining positive relationships • Resource availability: the extent a company uses multiple firm resources 4-7-2013 18 Business Diplomacy in MNCs: An Exploratory Study Huub Ruel, Tim Wolters, Raymond Loohuis HJM.RUEL@WINDESHEIM.NL
  • 19. Business diplomacy operationalization (2) 4-7-2013 19 Business Diplomacy in MNCs: An Exploratory Study Huub Ruel, Tim Wolters, Raymond Loohuis HJM.RUEL@WINDESHEIM.NL
  • 20. Business diplomacy operationalization (3) 4-7-2013 20 Business Diplomacy in MNCs: An Exploratory Study Huub Ruel, Tim Wolters, Raymond Loohuis HJM.RUEL@WINDESHEIM.NL
  • 21. Method 4-7-2013 21 Business Diplomacy in MNCs: An Exploratory Study Huub Ruel, Tim Wolters, Raymond Loohuis HJM.RUEL@WINDESHEIM.NL
  • 22. Method (1) 4-7-2013 22 Business Diplomacy in MNCs: An Exploratory Study Huub Ruel, Tim Wolters, Raymond Loohuis HJM.RUEL@WINDESHEIM.NL • Exploratory study • Qualitative (but we did a survey-based explanatory study as well in parallel) • Semi-structured interviews with CEO’s, Heads of government relations, public affairs, corporate communications
  • 23. Method (2) 4-7-2013 23 Business Diplomacy in MNCs: An Exploratory Study Huub Ruel, Tim Wolters, Raymond Loohuis HJM.RUEL@WINDESHEIM.NL
  • 24. Method (3) 4-7-2013 24 Business Diplomacy in MNCs: An Exploratory Study Huub Ruel, Tim Wolters, Raymond Loohuis HJM.RUEL@WINDESHEIM.NL
  • 25. Results 4-7-2013 25 Business Diplomacy in MNCs: An Exploratory Study Huub Ruel, Tim Wolters, Raymond Loohuis HJM.RUEL@WINDESHEIM.NL
  • 26. Business diplomacy as defined by interviewees 4-7-2013 26 Business Diplomacy in MNCs: An Exploratory Study Huub Ruel, Tim Wolters, Raymond Loohuis HJM.RUEL@WINDESHEIM.NL • In none of the eight MNCs the term business diplomacy is actually used • Yet, all MNCs recognized the concept and its importance • 7/8 MNCs provided definitions that showed much resemblance with our definition of business diplomacy • For example, Vopak: The more global you get as a firm, the more important it is to tighten the relationships with governments and non- governmental stakeholders. Business diplomacy, at its best, safeguards corporate image and reputation.”
  • 27. Business diplomacy (BD) intensity (1/2) 4-7-2013 27 Business Diplomacy in MNCs: An Exploratory Study Huub Ruel, Tim Wolters, Raymond Loohuis HJM.RUEL@WINDESHEIM.NL • All MNCs understand the importance of business diplomacy • Vopak, DSM, Randstad, Wolters Kluwer, Philips, Shell, and Finance Services firm conduct BD intensively • DSM, Shell use home government and embassy network in its BD
  • 28. Business diplomacy (BD) intensity (2/2) 4-7-2013 28 Business Diplomacy in MNCs: An Exploratory Study Huub Ruel, Tim Wolters, Raymond Loohuis HJM.RUEL@WINDESHEIM.NL DSM: Shell:
  • 29. Business diplomacy policy clarity (1/2) 4-7-2013 29 Business Diplomacy in MNCs: An Exploratory Study Huub Ruel, Tim Wolters, Raymond Loohuis HJM.RUEL@WINDESHEIM.NL • None of the eight MNCs applies a clear and organization-wide business diplomacy policy • The execution of business diplomacy depends on the country and its institutional setting • 5/8 MNCs (Randstad, Vopak, Philips, DSM and Royal Dutch Shell) have general business diplomacy guidelines • In 3/8 MNCs (Wolters Kluwer, Financial Services Industries and KPN), business diplomacy is carried by the business values and business principles
  • 30. Business diplomacy policy clarity (2/2) 4-7-2013 30 Business Diplomacy in MNCs: An Exploratory Study Huub Ruel, Tim Wolters, Raymond Loohuis HJM.RUEL@WINDESHEIM.NL Vopak:
  • 31. Business diplomacy breadth (1/2) 4-7-2013 31 Business Diplomacy in MNCs: An Exploratory Study Huub Ruel, Tim Wolters, Raymond Loohuis HJM.RUEL@WINDESHEIM.NL • In none of the MNCs all employees are involved in business diplomacy • Business diplomacy is generally perceived as a higher management activity • Yet, all employees need to consider themselves as representatives of the organization when they are in contact with external stakeholders of the business • For that purpose, all MNCs have set general business codes of conduct
  • 32. Business diplomacy breadth (2/2) 4-7-2013 32 Business Diplomacy in MNCs: An Exploratory Study Huub Ruel, Tim Wolters, Raymond Loohuis HJM.RUEL@WINDESHEIM.NL Vopak:
  • 33. Business diplomacy responsibility (1/3) 4-7-2013 33 Business Diplomacy in MNCs: An Exploratory Study Huub Ruel, Tim Wolters, Raymond Loohuis HJM.RUEL@WINDESHEIM.NL • Vopak, Shell, Randstad, Philips and DSM set guidelines for BD at the HQ. • But the business diplomacy responsibility is largely decentralized to the foreign subsidiaries • Why? - Business diplomacy should be adapted to the institutional context - Local subsidiary employees have the best insight in the institutional context in which they operate, and should therefore have the freedom to adapt business diplomacy to the specific characteristics of their local business environment • The business diplomacy guidelines and codes of conduct need to be adhered at all times
  • 34. Business diplomacy responsibility (2/3) 4-7-2013 34 Business Diplomacy in MNCs: An Exploratory Study Huub Ruel, Tim Wolters, Raymond Loohuis HJM.RUEL@WINDESHEIM.NL • Vopak: • Wolters Kluwer:
  • 35. Business diplomacy responsibility (3/3) 4-7-2013 35 Business Diplomacy in MNCs: An Exploratory Study Huub Ruel, Tim Wolters, Raymond Loohuis HJM.RUEL@WINDESHEIM.NL • Vopak: • Royal Dutch Shell:
  • 36. Business diplomacy means deployment (1/2) 4-7-2013 36 Business Diplomacy in MNCs: An Exploratory Study Huub Ruel, Tim Wolters, Raymond Loohuis HJM.RUEL@WINDESHEIM.NL • All MNCs deploy a wide variety of business diplomacy means • Examples: - direct stakeholder dialogues - events - forums/meetings - social projects and partnerships
  • 37. Business diplomacy means deployment (2/3) 4-7-2013 37 Business Diplomacy in MNCs: An Exploratory Study Huub Ruel, Tim Wolters, Raymond Loohuis HJM.RUEL@WINDESHEIM.NL Royal Dutch Shell: Wolters Kluwer:
  • 38. Business diplomacy means deployment (3/3) 4-7-2013 38 Business Diplomacy in MNCs: An Exploratory Study Huub Ruel, Tim Wolters, Raymond Loohuis HJM.RUEL@WINDESHEIM.NL Vopak:
  • 39. Business diplomacy resource availability (1/3) 4-7-2013 39 Business Diplomacy in MNCs: An Exploratory Study Huub Ruel, Tim Wolters, Raymond Loohuis HJM.RUEL@WINDESHEIM.NL • In all MNCs time and financial resources are available for business diplomacy • The CEO is often intensively involved in business diplomacy • In none of the MNCs specific business diplomacy training programs are available , but general stakeholder management training was done in 7 out of the 8 MNCs involved
  • 40. Business diplomacy resource availability (2/3) 4-7-2013 40 Business Diplomacy in MNCs: An Exploratory Study Huub Ruel, Tim Wolters, Raymond Loohuis HJM.RUEL@WINDESHEIM.NL Wolters Kluwer: Randstad:
  • 41. Business diplomacy resource availability (3/3) 4-7-2013 41 Business Diplomacy in MNCs: An Exploratory Study Huub Ruel, Tim Wolters, Raymond Loohuis HJM.RUEL@WINDESHEIM.NL Vopak: Financial Services Firm:
  • 42. Discussion & Conclusion 4-7-2013 42 Business Diplomacy in MNCs: An Exploratory Study Huub Ruel, Tim Wolters, Raymond Loohuis HJM.RUEL@WINDESHEIM.NL
  • 43. Discussion and conclusion (1) Key findings: - Seven MNCs conduct business diplomacy intensively; - None of the MNCs applied a clear and organization wide business diplomacy policy - General guidelines existed in five MNCs - The responsibility for business diplomacy was largely decentralized to subsidiaries - All MNCs used a wide range of business diplomacy means - Findings suggest that industry specific factors affect business diplomacy intensity - MNCs operating in weak institutional environments recognize the importance of business diplomacy more 4-7-2013 43 Business Diplomacy in MNCs: An Exploratory Study Huub Ruel, Tim Wolters, Raymond Loohuis HJM.RUEL@WINDESHEIM.NL
  • 44. Discussion and conclusion (2) 4-7-2013 44 Business Diplomacy in MNCs: An Exploratory Study Huub Ruel, Tim Wolters, Raymond Loohuis HJM.RUEL@WINDESHEIM.NL Future research: • Business diplomacy and different types of international firms • Business diplomacy in different institutional contexts • Business diplomacy language, longitudinal single case studies • Different types of BD: international BD, national BD, interfirm BD, and intrafirm BD • Explanatory studies: role of firm size, age, type of industry etc. • Relationship BD and firm performance, emerging market success
  • 45. Thank you! Questions 4-7-2013 45 Business Diplomacy in MNCs: An Exploratory Study Huub Ruel, Tim Wolters, Raymond Loohuis HJM.RUEL@WINDESHEIM.NL