Business diplomacy in multinational corporations

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

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
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Business Diplomacy in MNCs: An Exploratory Study
Huub Ruel, Tim Wolters, Raymond Loohuis
HJM.RUEL@WINDESHEIM.NL

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
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The business
diplomacy project so
far
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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:
tracking its roots
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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).
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• 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).
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• 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
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Business diplomacy:
positioning and
definition
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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).
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• Literature review
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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”.
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(3)
4-7-2013 14

(4)
4-7-2013 15
• 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

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?
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Business diplomacy
operationalization
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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
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Method
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Method (1)
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• 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

Method (2)
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Method (3)
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Results
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Business diplomacy as defined by interviewees
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• 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.”

Business diplomacy (BD) intensity (1/2)
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• 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

Business diplomacy (BD) intensity (2/2)
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DSM:
Shell:

Business diplomacy policy clarity (1/2)
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• 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

Business diplomacy policy clarity (2/2)
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Vopak:

Business diplomacy breadth (1/2)
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• 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

Business diplomacy breadth (2/2)
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Vopak:

Business diplomacy responsibility (1/3)
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• 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

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• Vopak:
• Wolters Kluwer:

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• Vopak:
• Royal Dutch Shell:

Business diplomacy means deployment (1/2)
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• All MNCs deploy a wide variety of business diplomacy means
• Examples: - direct stakeholder dialogues
- events
- forums/meetings
- social projects and partnerships

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Royal Dutch Shell:
Wolters Kluwer:

4-7-2013 38
Vopak:

Business diplomacy resource availability (1/3)
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• 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

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Wolters Kluwer:
Randstad:

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Vopak:
Financial Services Firm:

Discussion &
Conclusion
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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
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Discussion and conclusion (2)
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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

Thank you!
Questions
4-7-2013 45

Business diplomacy in multinational corporations

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