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Summary Book Nonmarket Strategic Management
Summary Nonmarket Strategic Management: by Voinea and Kranenburg. Contains chapter 1 t/m 11 incl. lecture notes.
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Voorbeeld 3 van de 19 pagina's
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Voorbeeld van de inhoud
Summary Book Nonmarket strategic managementPart I: Nonmarket strategic management through theoretical lenses
Chapter 1: Genesis of the nonmarket field
1.1 Introduction
The roots of the nonmarket concept lie in societal and theoretical choices made over several
decades. The nonmarket environment is:
Social, political and legal arrangements that structure interactions outside, but in conjunction
with, markets and private agreements
Forces outside the market system acting on economic actors
Internal and external (correcting) factors that provide order to market mechanisms and repair
market failures.
Four main perspectives provide an adequate overture for the nonmarket concept:
1. Neoclassical economics (economic factors): emphasizes the market mechanisms (balance in
supply and demand). Market institutions and firms were separated from nonmarket institutions
and the relationship between firms and markets are explained by either exogenizing nonmarket
factors of by neutralizing their effects altogether. Higher hierarchies (institutions) complement or
intervene where market mechanisms fail to manage transactions. Criticism: neglect other
implications of political, social and legal factors.
2. Organization theory (normative rules): explains the behaviour of organizations when interacting
with the NME (both ways). This perspective assumes a socialized or bounded rationality instead
of the simplicity of market determined issues assumed by neoclassic. Nonmarket exchange
mechanisms became necessary for improving the efficiency of market exchange mechanisms as
there are plagued by information asymmetry, property rights, bargaining and other problems.
Nonmarket institutions have a regulatory purpose as they provide rules, norms and customs
which allow firms to cope with uncertainty etc. The organization theory raised awareness that
social behaviour is involved in market exchange under forms of trust, commitment and
opportunistic behaviour. Criticism: it neglects to consider social aspects involvement in market
activities and overlooks the informal and formal aspects of economic activity or market
mechanisms.
3. Political theory (voice mechanism): legislation and such, creating a ‘voice’. Power is important
here. Through voice organizations can force a management change by mobilizing public opinion
as an alternative way to market failure. Organizations used voice mechanisms to appeal to higher
hierarchies or institutions. Nonmarket refers to the power based correctives used to improve all
organizations when competition fails to repair market mechanisms. If competition does not lead
to the exit of inefficient of ineffective organizations, then political voice is needed.
4. Sociology (social groups): societal groups like the media and action groups that reason from
certain norms and values. Economic factors, normative rules, and voice mechanisms are not
enough for societies to survive. For survival, societies need social integration, social institutions,
collective interest and motivating values. Social institutions refer to:
a. a complex of positions, roles, norms and values lodged in particular types of social
structures and organization relatively stable patterns of human activity with respect to
fundamental problems in producing life sustaining resources, in reproducing individuals
and in sustaining viable societal structures within a given environment.
Social institutions are establishments of relative permanence of a distinctly social sort
characterised by essential elements as: a set of mores or rules (consistency) fulfilled by people
acting collectively, in established complementary capacities or offers (concert).
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,1.6 The nonmarket concept
Society is made up of subsystems (economic, societal and cultural) each one having its own set of
institutions. There are many definitions of the non-market; the nonmarket refers to:
Values expressing the purposive pursuit of public interests
Internal and external interchange mechanisms of coercion and cooperation that complement
and balance competition in a reciprocal manner at various levels of interaction
Relationships among market and nonmarket organizations resting principally on their actors
sovereignty rights
The conflictual integration in the light of their failures of society economic, political, social and
cultural organizations.
Main differences between the market and nonmarket environment
There are some difference between the market and nonmarket environment.
Market environment Non market environment
An institution through which economic Various institutions incl. public ones governed by
exchange is governed by unanimity rule majority rule, collective action, and publicness
Rights are given to the participants in Rights are given to government officials, interest
economic exchange groups, activists, media, and the public
Actions are voluntary and result in Actions are not always voluntary and produce public
private benefits benefits affecting a broader group of parties E.G.
legislation applies to all not only to those who lobbied
for it
Some actions - prohibited in market, Allowed in the nonmarket
but.. E.g. Collusion among firms
Performance is evaluated as profits or Performance is evaluated in terms of ethical principles
value created (financial performance) or concepts of responsibility (social performance)
Core elements of the market and nonmarket
The core elements of the market and non-market environment
Market Nonmarket
Money (exchange mechanism, unit of accounting and store of value) Information
Leadership (pursuing monopoly) Coalitions (working together)
Flexibility (adapting to become leader) Consistency (wanting low risk)
Predictability (predict e.g. sales through models) Uncertainty (no models)
Value (economic value) Values (social/shared value)
1.7 Concluding remarks
The two environments are interrelated. The nonmarket environment should not be underestimated
by organizations since this environment influences the market transactions of organizations. In other
words, the sustainability of an organization’s competitive advantage also depends on its ability to
manage the influences coming from the nonmarket environment.
Chapter 2: Advancing the nonmarket environment: Expanding institutions, issues, interests and
information
2.1 Introduction
Components of the nonmarket environment consists of (4I’s):
1. Institutions: are the rules of the game in a society. Institutions can be distinguished between
informal and formal constraints. Informal constrains are a result of tradition and cultural
tradition, while formal institutions serve to solve the problem of trust and protection. Institutions
are composed of regulative, normative and cultural elements that guide behaviour and provide
stability and meaning to social life:
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, a. Regulative: establish rules, monitor if other comply with these rules and they can
sanction, reward or punish. Can be forces formally (government) and informally (societal
pressure).
b. Normative: introduce a prescriptive, evaluative and obligatory dimension into social life
(value and norms). Norms specify how things should be done. The role of institutions is
based on how actors are supposed to behave and this role can be formally and informally
constructed.
c. Cultural cognitive: shapes cognitions related to institutions. Culture can influence how
actors react to and perceive institutions.
Institutions are the constructs that are shaping the environment and organizational behaviour.
Institutions outline the rules of the game. There are different types of institutions that are
emerged:
a. Regulatory and legal institutions: are public establishments exercising autonomous
authority over specific areas of activity with a regulatory or supervisory capacity. They
cover areas of administrative law, regulation and rulemaking.
b. Political institutions: are portrayed by imperfect information, subjective models and high
transaction costs.
c. Social institutions: provide social order and generate wealth, power, solidarity and
respect. Organized interest groups and the media can influence firms and manipulate
policy makers and politicians.
d. Firms: engage in mobilizing resources to create wealth and benefits for all stakeholders.
2. Issues: the situation that has serve effects or falls heavily on large identifiable group of the
society. It are situations that are problematic to society or to an institution within society by a
group of actors or stakeholders. An organizational issue can be developed based on 3 themes:
a. Impact theme: some change occurs, it has been noticed and felt in the organization
before an issue exists.
b. Controversy theme: the possible disagreement over the best solution to the problem. It is
about the contestability among stakeholders regarding the possible solution to the
problem.
c. Expectational theme: specifies change as a function of continual stakeholder assessment
of performance of organization. Zenisek argues that conceptual gaps form around 3
types of incongruences between 1) management attitudes and reified organizational
behaviour; 2) societal expectations and reified organizational behaviour and 3) societal
expectations and management attitudes. Three types of expectational gaps:
i. What is versus what is – medium/high in overcoming the gap
ii. What is versus what ought to be – low/medium in overcoming the gap
iii. What ought to be versus what ought to be – low in overcoming the gap
So, an organizational issue is:
a. A controversial inconsistency based on one or more expectational gaps
b. Between the corporate actor (its image, function) and involved stakeholder groups
c. That occur within or between views of what is and/or what ought to be corporate
performance or stakeholder perceptions of corporate performance
d. Implies an actual or anticipated resolution that creates significant, identifiable present or
future impact on the organization.
Saliency: the importance of a certain issue to a broad segment of involved actors whose opinions
are coalescing around one or two policy options. Saliency is mainly explained by the interactions
between its creators: 1) Information cascades: happen when individuals choose to follow others
in their behaviour after having observed their actions and ignore the personal information which
they possess. (a.k.a. Rational ignorance). 2) reputation cascades: relate to individuals who view
themselves as specialists on a subject. Sources of nonmarket issues are:
a. Scientific discovery and technological advancement
b. New understandings
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