Approaches to Nonmarket Strategy

Abstract

Following Baron’s works that distinguish market from nonmarket strategies, this chapter aims to present the state of the literature on the latter by emphasizing their importance in managing the competitive environment of a firm. The nonmarket environment of business is becoming increasingly important for the formulation and implementation of overall organizational strategy. Nonmarket forces—political, social, and cultural—alter the competitive dynamics among firms. However, these forces can also be shaped by the firms themselves. The nonmarket strategies focus on the normative and institutional context of business operations. In addition to three main approaches—informational, financial, and relational—the scope of corporate political activities has been broadened by those undertaken in the legal arena. As well as activities carried out toward political or administrative players, like lobbying and financial contributions, an important potential exists in developing strategic behaviors in the legal arena. This triptych of activities aimed at influencing political and institutional actors is summarized as “lobby, buy, or sue.” Judicial strategies, as part of a nonmarket strategy, can pursue different objectives: to obtain damages, address unfair competitive practices, or enforce or protect rights. However, the more dynamic and innovative a business strategy, the more likely it is that a firm will encounter opportunities and face challenges in legal arenas. Consequently, firms may use law as a source of advantage in economic life.