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Today’s firms have a unique challenge if they want to stay competitive. In addition to effective market strategies, they need to navigate their so-called non-market environment to be successful. Firm’s non-market strategy usually comprises corporate social responsibility (CSR) and corporate political activity (CPA). While CSR addresses societal expectations through activities like corporate philanthropy, CPA addresses government expectations through activities like lobbying. Traditionally separate areas of business, societal and political issues are becoming increasingly intertwined. In some cases, a firms’ societal and political activities may be in conflict. For example, multinational firms from the West value democratic principles which may be undermined by government expectations while operating in autocratic countries. Companies operating in so-called sin industries (e.g., mining or weapons) may struggle to uphold a positive societal image but have close relationships to governments. In other cases, companies can align societal and political goals such as in the field of renewable energy.

Tailoring CSR and CPA Approaches to different static and dynamic Non-Market Realities

Our review study, published in the Journal of Management Studies, delves into how companies handle the interplay between societal and political expectations as part of their non-market strategy. Our core premise is that how firms’ CSR and CPA relate and whether they can (and should) be combined depends on the non-market context firms operate in. While it can be tempting to think about context as countries or industries, our study conceptualizes them through two factors: (1) to what extent firm operations depend on government (e.g., highly regulated industries or autocratic states) and (2) to what extent the expectations of external stakeholders towards the firm are heterogenous (versus homogeneous). Taking both factors into consideration, we develop a framework that identifies a range of non-market contexts and that allows researchers and managers to understand the interplay between CSR and CPA in each context. Our framework identifies four single static contexts based on high or low levels of each factor, as well as transitional contexts recognizing the dynamic nature of nonmarket environments, and cross-context settings that consider multinational and diversified domestic firms.

For instance, in contexts like autocratic states (e.g., China), where the government is the dominant non-market actor for firms, firms prioritize CPA over CSR to secure political legitimacy. Often in this context, the government relies on firms’ resources to address social welfare funding gaps and firms are politically pressed to engage in CSR in the form of charitable donations or the like. This means, however, that CSR becomes and extension of firms’ CPA which differs from a traditionally Western understanding of CSR as a voluntary activity.

Another example are transitional contexts, where firms adapt to shifts in power dynamics among non-market actors such as in countries transitioning between autocratic and democratic systems. One scenario sees firms moving from high to lower resource dependence on the government but facing increasing heterogeneous societal demands (e.g., Arab Spring). This transition increases the importance of CSR, while established political ties can become liabilities under new leadership. Seeking ties with the new ruling party takes time, leading firms to use CSR as a substitute for CPA to manage associated political risks. For instance, during Libya’s regime change, firms shifted from ties with Gadhafi’s dictatorship to investing in CSR projects, like building mosques or schools. Both research as well as our practical understanding of CSR-CPA strategies in the various possible transitional contexts are still in their infancy and our study develops a rich agenda for future research to address these gaps.

Practical Guidelines for Managers to Optimize CSR-CPA Strategies in Multinational Environments

Finally, our framework integrates insights on CSR-CPA strategies in cross-context settings such as multinational operations, where we are also lacking a more nuanced understanding due to a lack of studies. While the challenges of Western firms operating in countries like China have been well-documented, our framework helps researchers and managers to understand why challenges occur and in which contexts their home and host country CSR-CPA strategies actually can be aligned. If firms’ non-market environments at home and abroad are requiring CSR-CPA strategies that are very different or even irreconcilable, firms will likely face challenges in their multinational non-market strategy. For example, Google withdrew from the Chinese market as engaging with government expectations in China undermined Western CSR standards and created significant legitimacy challenges for the company. In contrast, cases where a multinational company operates in cross-context settings but do not face any tensions are when the host and home country context share important features such as societal and political actor expectation.

Thus, our study provides concrete takeaways for both researchers and managers operating in CSR and/or CPA related areas. Our framework provides scholars with a theoretical framework to explore CSR-CPA strategies in a wide variety of contexts, while managers can use our framework to assess appropriate CSR-CPA strategies for the contexts they operate in.