Why Market Strategies are Necessary, but not Sufficient: Lessons for Leaders of Sovereign States

Political behavior by sovereign states has often been argued in terms of market driven strategy. Political interaction between sovereign states, however, is often found in the non-market arena. In order to inform this interaction, institutional theory, political economy, relational theory, and cultural relativism are reviewed. Baron’s integrated strategy model is then expanded to integrate value frameworks at a national level. Political behavior of sovereign states is shown to be dependent on non-market strategy, emergent from its institutionalized value framework as moderated by the market strategy of the nation. The most serious challenge for the world economy in the years ahead lies in making globalization compatible with domestic social and political stability—or to put it even more directly, in ensuring that international economic integration does not contribute to domestic social disintegration [emphasis in original].(Rodrik 1997)Our daily news is filled with strife; the world is painted as a complex tangle of political positions, trade imbalances, corporate scandals, and terrorist resistance. The leaders of the world’s sovereign nations face the daunting task of representingthe interests of the people within their territorial boundaries while managing their nation’s interests between nation states. The process of globalization has served as a catalyst to increase interaction between sovereign nations (Vernon, 1971; Hymer, 1976; Vernon, 1981); it is clear that the need to theoretically inform the interaction between nations is increasing. This paper is an effort to provide a novel approach to this gap – it asks what the leaders of a sovereign state can learn from management scholarship. U.S.CoastGuardAcademy, Department of Management, 27 Mohegan Ave., New London, CT06320. Phone: 860-701-6462, Email: Kevin.j.lopes@uscga.edu U.S.CoastGuardAcademy, Department of Management, 27 Mohegan Ave, New London, CT06320. Phone: 860-444-8342, Email: laurel.r.goulet@uscga.edu 30 Journal of Management Policies and Practices, Vol. 2(4), December 2014 Two sovereign governments interact when issues impact the welfare of people and institutions within each of their territorial jurisdictions. When a sovereign nation with high levels of international influence, such as the United States, interacts with a less internationally influential sovereign power, this process is often called nation building. The mission of nation building is change; this change can be achieved through several means. The problem with attempting to build change by any means within another sovereign nation, however, is a susceptibility to resistance. Leaders of the government institutions that represent sovereign nations are initiating change and actively trying to prevent negative factors of resistance from other nations. If a sovereign nation attempts to enact change in another sovereign nation, however fails to prevent or neutralize significant resistance, it faces the dilemma of reverting back to pre-change alignment or having the change attempt fail. The better a government leader understands the methods available to enact change, and the resistance they may face when influencing change in another sovereign nation, the more likely their attempted change will be successful. This paper seeks to expand the international pie by exploring the addition of a non-market driven approach. Purpose, Methodology and Significance The purpose of this paper is to use institutional theory to connect concepts found within several streams of literature to develop an integrated interdisciplinary non-market theory of the sovereign nation. The following analysis borrows from international business, sociology, decision theory, and organization theory. Because of the extent of the literature found in each of these different disciplines, integration of all relevant factors, interactions, and implications is impossible. This analysis is put forth to introduce concepts from each of these fields, to challenge some of the underlying concepts that govern some of the assumptions made in political economy, and to suggest different avenues for future theoretical and empirical research concerning the non-market interaction between sovereign states. A vast international business strategy literature exists that could inform state to state relations. International management researchers have explained the relationships between many components of multi-national enterprise (MNE) strategy including the pace, rhythm, scope, motivation and mode of entry using different theoretical lenses (Chung, 2001; Harzing, 2002; Vermeulen & Barkema, 2002).