The effectiveness of corporate political strategies in transition economies

This paper presents a framework for the analysis of the effectiveness of MNE’s corporate political activities in the transition economies. We relate the success of corporate political strategy to 1) the strength of the fit between the host country’s industrial policy and MNE resources; 2) institutional distance between the two countries, and 3) choice of the host or home government for the action. We also discuss the circumstances in which the MNE should consider proactive strategies in the public policy domain and when the compliant strategies will be more effective. We argue that proactive political strategies are effective when there is a strong fit between the MNE’s resources and the industrial policy of the host government. We also suggest that proactive strategies are likely to be effective if used by a multinational coming from institutionally similar countries with the transition economies and best implemented via the host government. At the same time, multinationals coming from highly dissimilar institutional environments are likely to be better off drawing on the assistance of their home governments in negotiations in the transition economies. Finally, we offer real world examples from a large scale study of foreign businesses operating in China to illustrate the framework