International Business Diplomacy: How Can Multinational Corporations Deal with Global Challenges?

Description

Multinational enterprises (MNEs) experienced golden days during the 1990s and 2000s, they expanded globally and were major players in globalization. Today they have become powerful actors in the global economy. CEOs of international businesses are welcomed by heads of state as their counterparts, they are invited by governments to help solve global issues such as climate change and poverty, and they are facing dilemmas comparable to those of other international actors. However, MNEs are facing global legitimacy challenges. They are suspected of tax avoidance, using low wage countries for corporate benefits only, disrespecting privacy regulations, abusing consumer data, violating local community rights, exploiting natural resources, ignoring basic human rights, and employing too many lobbyists targeting national and international political decision-making processes for their own corporate interests. Although many of these challenges are not new, they have resurfaced and become more apparent during the past couple of years, partly due to the economic recession that many developed economies have faced and to the broader awareness of increasing global inequality and the importance of sustainability. How can international business respond? Strategic business diplomacy may be the answer. Business diplomacy involves developing strategies for long-term, positive relationship building with governments, local communities, and interest groups, aiming to establish and sustain legitimacy and to mitigate the risks arising from all non-commercial or exogenous factors in the global business environment. Business diplomacy is different from lobbying or strategic political activity; it implies an (strategic / holistic) approach of an international business to look at itself as an actor in the international diplomatic arena. Representation, communication and negotiation are key in such an approach. One of the consequences is that MNEs are able to operate in and show respect for an international business environment that consists of multiple stakeholders. This demands a strategic perspective and vision on the sector and the business environments in which the company wants to operate, and requires a specific set of instruments, skills and competences. Front Cover International Business Diplomacy: How can Multinational Corporations Deal with Global Challenges? Copyright Page Contents List of Contributors Part I: Conceptualizing Business Diplomacy 1. Introduction to the Volume International Business Diplomacy: A Strategy for Improving MNCs’ Performance? A Review of the Concept and New Insights from Five European MNCs Introduction Literature Review Definition of Business Diplomacy Different Types of Business Diplomacy Intrafirm Business Diplomacy Interfirm Diplomacy Home-Country Government Diplomacy International MNC Diplomacy International Business Diplomacy Definition of Firm Performance Conclusion on Firm Performance Relationship between Business Diplomacy and Firm Performance MNC and NGO Partnerships Importance of NGOs in the Business Environment Effects of MNC–NGO Partnerships on Firm Performance Conclusion on MNC–NGO Partnerships MNC–Host Government Relations Importance of Host Governments in International Business Effects of MGRs on Firm Performance Conclusion on MGRs MNC Relations with Local Communities Importance of Local Community Relations in the Business Environment Effects of MNC–Local Community Partnerships on Firm Performance Conclusion on MNC–Local Community Partnerships Threats to International Business Diplomacy Activities Definition of Bribery and Corruption Conclusion and Relevance of Antibribery Mechanisms Research Methodology Results MNC–NGO Relations To What Extent Do NGO Relationships Exist within the Company? How Do These Relationships Work? Who Is Involved within These Relationships? Which Benefits Do These NGO Relations Have on the Firm Performance? Conclusion on MNC–NGO Relations MNC–Host Government Relations To What Extent Do Government Relations Exist within the Company? How Do These Relationships Work? Who Is Involved in These Relationships? Which Benefits Do Those Host Government Relationships Have on Firm Performance? Conclusion on MNC–Host Government Relations MNC–Local Community Relations To What Extent Do Local Community Relationships Exist within the Company? How Do These Relationships Work? Who Is Involved within These Relationships? Which Benefits Do Local Community Relations Have on Firm Performance? Conclusion on MNC–Local Community Relations Threats to Diplomatic Business Activities Conclusion Discussion Scientific and Practical Relevance Limitations Recommendations for Future Research The Chapters in This Volume References 2. Business Diplomacy in Implementing the Global 2030 Development Agenda: Core Competencies Needed at the Corporate and Managerial Level Introduction From Transactions to Partnerships: The Challenge of SDG Implementation for Business Business Diplomacy as Catalyst for SDG Partnerships Business Case in Adopting 2030 Agenda for Sustainable Development and for Strengthening Business Diplomacy Capability Financial Framework for the SDG Partnerships: Addis Ababa Action Agenda on Financing for Development Business Diplomacy as the Missing Link of CSR Business Diplomacy: An Organisational and Managerial Response Recommendations in Putting Business Diplomacy into Practice Conclusion References Appendix 1: Sustainable Development Goals Appendix 2: Detailed Mapping and Text Analysis on Addis Ababa Action Agenda (2015) Appendix 3: Traditional Education Versus Key Competencies of Business Diplomacy Management 3. What Companies and Universities Mean by Business Diplomacy Introduction Business Diplomacy The Business/Diplomacy Interplay Business inside Diplomacy Diplomacy inside Business Business Diplomacy inside Companies Business Diplomacy inside Universities Conclusion Bibliography 4. Business Diplomacy in Emerging Markets: Intersection of Roles between States and Multinationals Introduction Definition of Terms: Commercial Diplomacy, Economic Diplomacy and ‘Business Diplomacy’ Links between Diplomacy and Trade The Intersection between the Roles of the State and of Multinationals Changes in Classical Diplomacy Multinationals and Business Diplomacy in Emerging Countries Representation Gathering Information Negotiation Companies’ Negotiating Power vis-à-vis Governments Negotiations between Companies from Different Countries Multinationals and Actors External to Business Conclusion Perspectives References 5. Business Diplomacy in a Consulariate Format: Historical Evolution and Challenges in Globalized World Introduction From Diplomacy to Business Diplomacy The Historical Evolution of the Concept of Business Diplomacy Proxenos The Consuls Honorary Consuls Diplomacy and Diplomats Chambers of Commerce Diplomacy as an Industry The Consulariate Consulariates versus Consulates: The Case of the Chambers of Commerce Conclusion References Part II: Topical Business Diplomacy 6. The Ethics and Business Diplomacy of MNE Tax Avoidance Introduction A Conceptual Framework for Assessing MNE Tax Strategy Ethics and Responsibility in Tax Avoidance Business Diplomacy in Tax Contribution Economic Patriotism and Corporate Inversion Tax Havens and Transfer Pricing Practices Four Possible Solutions Conclusion: The Broader Context of Public Policy Avoidance References 7. Legitimacy of State Ownership in Foreign Direct Investments by Emerging Economy Firms Introduction Corporate Diplomacy and Outward FDIs by State-Owned Firms Drivers of Outward FDI by State-Owned Emerging Economy Firms Characteristics of Overseas FDI Projects and Investment Locations Institutional Restrictions of Home Country and FDI Entry Strategies Institutional Restrictions of Host Country and FDI Entry Strategies Influence of State Ownership and Political Connection on FDI Entry Strategies Illustrations of Outward FDIs by Chinese State-Owned Firms and Their Presence in Africa Discussion and Conclusions References 8. Businesses, Associations and a Multiactor Diplomacy Associations Research Questions Problems with Representation The Relevancy of Associations The True Number of Associations and Their Impact Internationalization of Associations Conceptual Change within Associations Implications Testing Definitions Associations and the Energy Business Associations and the Prowess of a Profession Associations and the Import Needs of the State of Dubai Impact The Limits of Business Diplomacy as a Concept: There is More to Business than Business The Limits of Business Diplomacy as a Concept: More Focus on the Art of Diplomacy Esprit du corps Diplomatique Different Phases in the Development of Diplomacy Conclusions Recommendations References Part III: Business Diplomacy 9. Business Diplomacy in Brazil: Early Lessons from an Emerging Economy Introduction Business Diplomacy versus Corporate Diplomacy Brazil’s Emergence as a Growing Economic Power The Internationalization of Brazilian Firms BMNCs and Business Diplomacy Petrobras and Odebrecht Conclusions and Future Research Agenda References 10. Corporate Diplomacy and Institutional Upheaval in Host Countries: The ‘Arab Spring’ Experience of Two Canadian Multinationals in Egypt Introduction Theoretical Background Data and Methods Research Setting Case Selection Data Collection Data Analysis Stage 1: Codifying the Actions and Reactions of Institutional Actors Stage 2: Categorising Data and Clarifying Constructs Stage 3: Integrating Patterns and Developing Theory Analysis and Findings Changing Institutional Arrangements around the MNE over Time Securing Government Support to Exploit a Business Opportunity Facing Civil Society’s Efforts to Upset Firm–Government Ties during the Unrest Seeking to Build Social Legitimacy with Civil Society Following the Revolt Shifting Logics of Institutional Work by Firms Dealing with Institutional Turmoil Discussion and Conclusion References 11. Selected Global Challenges in View of a Commercial Diplomat: Selected Practical Cases from the Business, Trade and Commercial Diplomacy Introduction and Theory Challenges and Issues – Cases and Questions Challenges of the Commercial Diplomacy in the EU Challenges of Limited Capacities Challenges of OECD and EU Challenge of Sustainable Development in the EU and in Developing Countries Challenge of Digitalisation Challenges of Tax Avoidance and Tax Attraction Challenge of Public–Private Partnership – Czech Dutch Chamber of Commerce Conclusions and Recommendations Disclaimer References Index