Contracting Beyond the Market: Property Rights, Externalities, Historical Conflict, and Contractual Agreements between Firms and Nonmarket Stakeholders
Sinziana Dorobantu and Kate Odziemkowska
Sinziana Dorobantu and Kate Odziemkowska
ABSTRACT: Despite firms’ growing engagement of nonmarket stakeholders – such as local communities and nongovernmental organizations – little attention has been devoted to understanding the emergence of contractual agreements between firms and nonmarket actors. Considering that a very large number of such contracts are theoretically possible but only a small number exist, we seek to understand what factors explain the use of contracts to govern some firm-stakeholder relationships and not others. We ground our inquiry in transaction cost economics, which views governance as a means to infuse order into a relation where potential conflict threatens value creation. We propose that the property rights, the externalities, and the history of conflict that define the relationship between a firm and a nonmarket stakeholder influence the potential for conflict between them and therefore the probability of observing a contract to govern their relationship. Using novel data on the location and relationships between indigenous communities and mining firms in Canada, we identify a plausible exhaustive set of indigenous communities “at risk” of signing a contract with a mining firm. To measure the property rights, externalities, and historical conflict in the relationship between a firm and a local community we rely, respectively, on historically assigned property rights over a mining area, the mine-community colocation in a watershed, and archival records of protests and blockades. We find support for our propositions by examining which of the 4,414 dyads (formed by 457 indigenous communities and 85 firms) have signed 190 contracts between 1999 and 2013.
Political Context, Social Movements, and Uber’s Challenges in Different Markets
Sinziana Dorobantu
Sinziana Dorobantu
ABSTRACT: This paper examines the relationship between formal political institutions and the strategic choices of incumbents by analyzing the response to Uber’s entry in over 65 countries around the world. In about half of these locations, the launch of the Uber platform was met by strong backlash from an anti-Uber social movement. In France, Spain, and several other countries, Uber faced a strong backlash both from the taxi industry and from the general public, and experienced numerous protests, acts of violence, and the arrest of its top executives. In Germany, the anti-Uber movement focused most of its efforts on lobbying and legal action that led to a national ban on Uber’s operations. By proposing that formal political institutions shape the likelihood of incumbents using social movement strategies to deter potential entrants, this paper aims to add to growing research at the intersection of social movements and non-market strategy.
Proactive Stakeholder Engagement and Stakeholder Preferences for Firm Investments
Sinziana Dorobantu, Witold Henisz and Lite Nartey
Sinziana Dorobantu, Witold Henisz and Lite Nartey
ABSTRACT: We argue in this paper that proactive engagements – defined as actions or statements initiated by the firm and aimed at stakeholders who have never spoken publicly about the firm – shape stakeholder preferences for the engaging firm’s investments. Stakeholder preferences, however, are also influenced by the reported opinions and actions of elite stakeholders, as well as by the tenor of media coverage. We test these hypotheses using a unique panel dataset combining 20,112 firm-initiated interactions and 14,633 stakeholder-initiated interactions between 19 gold mining companies and almost 2,300 social, political and economic stakeholders. We find that firm-initiated proactive engagements positively affect stakeholders’ preferences, and that such proactive engagements have a higher impact than the reported actions or opinions of elite stakeholders. By contrast, the reported actions or opinions of other stakeholders have no impact. At the aggregate level, we find that the overall media coverage of actions and expressions of opinions by a firm towards its stakeholders and by stakeholders towards the firm is a good predictor of a stakeholder’s expressed preference for supporting a firm’s investments.
Interorganizational Diversity, Institutional Risk, and the Formation of Multipartner Syndicates
Sinziana Dorobantu, Thomas Lindner and Jakob Muellner
Sinziana Dorobantu, Thomas Lindner and Jakob Muellner
ABSTRACT: We examine how interorganizational diversity affects the formation of multipartner banking syndicates that come together to finance some of the world’s largest infrastructure projects. Previous studies have shown that diversity negatively affects partnership formation because it increases the costs of cooperation among the partners and the probability of conflict between them. We extend this research and argue that the negative relationship between interorganizational diversity and partnership formation is moderated by the institutional context in the country where the infrastructure project will be located. We compare 1,100 realized with over 25,000 unrealized multipartner syndicates and examine the likelihood of their formation in countries with different levels of institutional (specifically, political and social) risk. We show that diverse syndicates are more likely to form when investing in high-risk countries than when investing in low-risk countries. Our findings suggest that the country-level institutional environment is an important consideration in the formation of interorganizational partnerships.
Actions Speak Louder Than Words: A Hierarchy Of Participatory Stakeholder Engagement
Lite Nartey, Sinziana Dorobantu and Witold Henisz
Lite Nartey, Sinziana Dorobantu and Witold Henisz
ABSTRACT: Scholars of stakeholder engagement and corporate social responsibility have questioned how to strategically engage stakeholders to obtain the strategic benefits of cooperation and reduce conflict. Integrating insights from organizational perception management and social movements, we study the broad repertoire of symbolic and substantive elements of corporate reactions to activism. We evaluate the relationship between stakeholder cooperation-conflict, verbal engagement (i.e., announcements) and material engagement (i.e., meetings, payments, in-kind contributions and other material activities). We find announcements are positively but modestly associated with cooperation, whereas meetings, payments and in-kind contributions have a stronger positive association. We use an original dataset of roughly 52,000 media-reported stakeholder events capturing the dyadic engagement among 2,097 stakeholders and firms associated with 19 gold mining companies operating 26 mines in 20 countries.
Building Political Leverage Through Interorganizational Partnerships
Sinziana Dorobantu and Jakob Muellner
Sinziana Dorobantu and Jakob Muellner
ABSTRACT: We argue that firms investing in countries with high levels of political and social risk – in short, socio-political risk – use interorganizational partnerships with other multinational companies and with intergovernmental organizations to increase their leverage over stakeholders in the host country. We test our arguments by evaluating the formation of large banking syndicates formed to finance 5,928 of the world’s largest infrastructure and energy projects in 160 countries between 2000 and 2013. We show that when financing the development of large projects in countries with high socio-political risk, syndicates are more likely to involve banks from countries that hold greater political leverage over the government in the host country. These syndicates are also more likely to involve the participation of intergovernmental organizations such as the World Bank despite the added complexity of bringing these organizations in the syndicate. Our study highlights that the composition of interorganizational partnerships is largely driven by political considerations when the project is located in countries with high socio-political risk.