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立 政 治 大 學
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N a tio na
l C h engchi U ni ve rs it y
1. Introduction
Multinational companies in this beginning of the 21st century play in a multifaceted environment. The context is both characterized by the culmination of the globalization process, which extends the existing game and the excesses of globalization, which press on changing the game. On the one hand, markets expansion, acceleration, and interconnection make competition more intense and complex. On the other hand, non-market parameters tend to be increasingly crucial, especially after the global economic crisis of 2008 which highlighted the
“mad finance syndrome” and urged a move toward a more regulated and fairer globalization.
The trend is for multinational companies to comply with new rules (i.e. overlapping of governmental and supra-governmental legislations), deal with new players (i.e. NGOs, civil society, communities, the media, and the governments) and cope with new issues in political, social and environmental areas. There is therefore a need for multinational companies to broaden their strategic approach. Both market and non-market parameters should be taken into account in their quest toward competitiveness, legitimacy and sustainability.
Business diplomacy is a unique concept to address this growing need. More precisely, business diplomacy “pertains to the management of interfaces between the global company and its multiple non-business counterparts and external constituencies. [It] build[s] bridges between core businesses and the complex political environments within which global firms conduct business.” (Saner, Yiu and Sondergaard, 2000)
On the basis of this definition, business diplomacy ensures the link between corporations and their non-market environment, that is to say the “social, political, and legal arrangements that structure the firm's interactions outside of, and in conjunction with, markets”. (Baron, 1995)
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國立 政 治 大 學
‧
N a tio na
l C h engchi U ni ve rs it y
Especially, the non-market environment concerns those relationships with “the public, stakeholders, government, the media, and public institutions.” (Baron, 1995)
Although the importance of linking businesses with the non-market environment is broadly recognized, the notion of “business diplomacy” (also called “corporate diplomacy”) remains rarely employed and not fully considered yet by researchers and professionals. This being said, some theoretical works do explore this concept in the fields of international business and strategic management, and some more papers address similar issues through associated concepts such as public affairs or corporate political activities. Theoretical works on business diplomacy most often provide conceptual considerations to refine the definition of this broad concept (Asquer, 2012), discuss the added value of business diplomacy (Ordeiw-Rigo & Duarte, 2009) or its roles (Saner and Yiu, 2005). This deficiency will be elaborated further in the literature review.
In practice, business diplomacy turns up to be a real question for practitioners, especially when conducting cross-border activities. This is evidenced by the Institute Choiseul for International Politics and Geoeconomics1, which recently devoted an entire book (Lucas, 2012) to collect testimonies by business leaders, managers, diplomats and experts: from the point of view of those practitioners in varieties of industries, companies and departments, coping with their non-market environment has become a daily major concern and a profession in itself. To
such an extent that the Institute Choiseul decided to make the mentioned book serves as the first in an annual series dedicated in collecting testimonies and entitled “The business diplomats”.
1 French research center specializing in the analysis of international affairs.
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國立 政 治 大 學
‧
N a tio na
l C h engchi U ni ve rs it y
However, if all of the interviewed practitioners were involved in one way or the other with business diplomacy, none of them were officially holding a position of “business diplomat”:
some were working in public affairs or public relations, others were in charge of international strategy. They could have been responsible for corporate social responsibility as well, or compliance.
In addition to the anecdotal evidence provided by these testimonies, a few academic researches have conducted qualitative or quantitative analysis to compare the different manners whereby multinational companies implement business diplomacy, for example in the Swiss pharmaceutical industry (Saner and Yiu, 2005).
Stated plainly: the position of “business diplomat” does not exist so far as a formal corporate function: business diplomacy practices represent a collection of perspectives, rather than an integrated grouping. Each company has its own approach toward the non-market context.
While the lack of a systematic practice in business diplomacy has been clearly observed, and despite the unanimously acknowledged importance of the concept, solutions to bridge the gap between theory and practice are left largely unexplored. “To date, the field of nonmarket strategy has little to offer in the way of a truly integrated perspective” (Mahon et al. 2003).
Therefore, the research question of this thesis is: How can multinational companies move from the concept of “business diplomacy” to the position of “business diplomat” in a more systematic and integrated way? Business diplomacy covers three domains: the management of non-market stakeholders (that I also call the players, using a game analogy), the management of non-market issues (the factors in play) and the scanning of non-market environments (the rules
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國立 政 治 大 學
‧
N a tio na
l C h engchi U ni ve rs it y
global).
However, I establish that this model passes through a siloed approach: an horizontal segmentation which ignores the overlaps between the different domains and a vertical segmentation which ignores the multi-layers interactions and discontinuities. Central to my argument is that such a fragmented perspective, splited between different departments and different organizational levels in the company, is very likely to result in inconsistencies, inefficiencies and even counter productivities. The case of the Royal Dutch Shell Company will be especially useful to give texture to my argument.
My metaphor makes things glaringly obvious: how can we seriously isolate the players, the factors in play and the rules of the game? Completing in practice the roles of business diplomacy toward the non-market environments is a delicate balancing act which can only be successful through a more transverse approach.
Overall, the goal of this paper is to create an integrated model to address the non-market environment and deal with the three roles of business diplomacy (socio-political scanning, stakeholders management and issue management), across the different layers of implementation (global, regional, national and local) in a comprehensive and systematic way.
The rest of this thesis is organized as follow. I first describe the existing siloed model and highlight the challenges that emerge from its horizontal and vertical segmentations.
Then, I propose a new approach that builds on the same three domains (socio-political scanning, stakeholders management and issue management) and four layers (global, regional, national and local). However, I superimpose these elements, instead of displaying them side-by-side:
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國立 政 治 大 學
‧
N a tio na
l C h engchi U ni ve rs it y
this is the heart of my proposal. As a major advantage, this allows considering the different domains and layers in combination with the others, making interfaces visible. The first step of my model superimposes the three domains and explores their overlaps: this helps resolving the challenges derived from the initial horizontal segmentation. In the second step, I superimpose the different layers, in order to tackle the interdependencies and discontinuities that come from the vertical segmentation.
From the superimposed areas of the model, I highlight a whole set of new transverse questions that multinational companies do not handle in a systematic and integrated manner when dealing with the non-market context. By doing so, I identify a new domain at the intersections of the horizontal and vertical dimensions of the non-market context. I propose that this domain, located at the heart of the model, should be the responsibility of a new created position: the
“business diplomat”, serving as an interface between the many non-market overlaps, interdependencies and discontinuities. At this point, the journey from the concept of business diplomacy to the position of business diplomat will have already come a long way.
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國立 政 治 大 學