Between a Rock and a Hard Place: Developing Organizational and Institutional Fit in MNE Subsidiary Political Strategy in Contexts of Institutional Upheaval

54 Pages Posted: 17 May 2019

See all articles by Dorottya Sallai

Dorottya Sallai

University of Greenwich

Gerhard Schnyder

Loughborough University London - Institute for International Management; University of Cambridge - Centre for Business Research; King's College London

Date Written: April 17, 2019

Abstract

Recent corporate political activities (CPA) studies applying the “fit paradigm” found that foreign subsidiaries’ political capabilities in emerging markets are shaped not just by host country- but also by home country institutions: Subsidiaries of multinational enterprises (MNEs) need to develop CPA that “fit” parent political capabilities. Yet, this literature neglects that this “organizational fit” requirement goes together with an “institutional fit” requirement between subsidiary CPA and the host institutional environment. Achieving this dual fit is particularly difficult in very volatile institutional host environments where the value of political capabilities changes rapidly. In such environments subsidiaries face a dilemma between the decreasing “institutional fit” of easily transferable capabilities and the lack of “organizational fit” of necessary “sticky,” local ones. To understand how firms deal with this dilemma, we develop a typology of political capabilities that takes into account their varying transferability/stickiness and their dynamic institutional contingency in the host country. Our empirical study of Hungary shows that MNEs even from institutionally very different economies can successfully transfer political capabilities to develop effective CPA in a radically volatile political environment. Yet, as political risk becomes discontinuous, this strategy may reach its limits.

Keywords: nonmarket, strategies, MNE subsidiaries, capabilities, corporate political activities (CPA), transferability

JEL Classification: H11, M16, P16, P26, H13

Suggested Citation

Sallai, Dorottya and Schnyder, Gerhard, Between a Rock and a Hard Place: Developing Organizational and Institutional Fit in MNE Subsidiary Political Strategy in Contexts of Institutional Upheaval (April 17, 2019). Available at SSRN: https://ssrn.com/abstract=3373607 or http://dx.doi.org/10.2139/ssrn.3373607

Dorottya Sallai (Contact Author)

University of Greenwich ( email )

Old Royal Naval College
30 Park Row
London, SE10 9LS
United Kingdom
+44(0)2083319198 (Phone)

HOME PAGE: http://www.linkedin.com/in/dorottyasallai

Gerhard Schnyder

Loughborough University London - Institute for International Management ( email )

Lesney Avenue
Here East
London, E15 2GZ
Great Britain
+44 (0)20 3805 1360 (Phone)

University of Cambridge - Centre for Business Research ( email )

Judge Business School Building
Cambridge, CB2 1AG
United Kingdom
++44 (0)1223 765325 (Phone)

HOME PAGE: http://www.cbr.cam.ac.uk/people/research-associates/gerhard-schnyder/

King's College London ( email )

150 Stamford Street
London, SE1 9NN
United Kingdom
++44 (0)20 7848 4633 (Phone)

HOME PAGE: http://www.kcl.ac.uk/schools/sspp/mgmt/people/academic/schnyder/

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