W4 - LITERATURE Flashcards
(189 cards)
1
Q
What is Corporate Political Activity (CPA)?
A
Corporate attempts to shape government policy in ways favorable to the firm
CPA is defined as any deliberate firm action intended to influence government policy or process.
2
Q
What are the four context-fitting but ethically suspect political strategies identified in the study?
A
- Affective strategies
- Financial strategies
- Pseudo-attribution strategies
- Kinship strategies
3
Q
What theory does the study draw upon to explain corporate political strategies?
A
Resource-dependency theory
This theory suggests that firms are dependent on external environments and their behavior reflects this dependency.
4
Q
Why is CPA context-dependent in weak institutional environments?
A
Firms design their political strategies based on the prevailing conditions in their external environments
This contrasts with the assumption that Western-oriented CPA strategies are universally applicable.
5
Q
What is the main issue with managerial political ties in emerging countries?
A
They are associated with poor corporate governance, corruption, bribery, and cronyism.
6
Q
What is the significance of the study’s findings regarding the banking industry?
A
Political strategies may be industry-specific, allowing banks to manage finances for politicians in return for policy favors.
7
Q
What does the study suggest about the relationship between CSR and CPA?
A
CSR may serve as a political strategy, especially when it boosts politicians’ re-election chances.
8
Q
What are some examples of unethical practices associated with CPA in Nigeria?
A
- Corruption
- Bribery
- Cronyism
9
Q
How does the study challenge the current conceptualization of politically connected firms?
A
It shows that connections can exist at the level of ordinary employees, not just senior managers or board members.
10
Q
True or False: The study finds that CSR is always conducted voluntarily without political motivations.
A
False
The study indicates that CSR can be used as a political strategy to enhance re-election prospects.
11
Q
Fill in the blank: The study reveals that Nigerian banks orchestrate four distinct but ethically suspect strategies: Affective, Financial, ________, and Kinship strategies.
A
Pseudo-Attribution
12
Q
What does the study suggest about the dynamic relationships between firms and politicians?
A
There is a two-way dependency where both firms and politicians rely on each other for resources.
13
Q
What is Corporate Political Activity (CPA)?
A
Any deliberate firm action intended to influence government policy or process
CPA is aimed at gaining favorable government policies that can benefit the firm.
14
Q
What is a key driver of CPA in emerging countries?
A
Resource dependency
Political connections serve as substitutes for weak market-supporting institutions.
15
Q
What challenges do firms face in emerging countries?
A
Severe constraints such as information asymmetry and high transaction costs
These challenges arise from voids in product, labor, and capital markets.
16
Q
How do political connections benefit firms in emerging markets?
A
They help obtain critical resources and preferential treatment in capital and policy markets
Political connections are crucial for facilitating economic exchanges.
17
Q
According to resource-dependency theory, what can CPA help firms reduce?
A
Uncertainties associated with dependency
Firms use CPA to address their exposure to environmental uncertainty.
18
Q
What is one consequence of political connections for firms?
A
Protection from bankruptcy and failure
This can be through bailout programs and lenient regulatory enforcement.
19
Q
What negative associations are linked to CPA in emerging countries?
A
Bribery, corruption, and cronyism
CPA often leads to poor governance and unethical practices.
20
Q
What are the three political strategies proposed by Hillman and Hitt?
A
- Constituency building
- Financial incentive
- Information strategy
These strategies aim to influence government policies and decision-making.
21
Q
What is the most prevalent political strategy in emerging countries?
A
Relational strategy
This involves personal-level connections between managers and politicians.
22
Q
What does the resource-dependency theory suggest about firms and politicians?
A
Firms manage government actors to achieve domain defence and maintenance
This reflects a dependency relationship where firms depend on politicians for favorable conditions.
23
Q
What is a significant issue within Nigeria’s political environment?
A
Widespread corruption at all levels of government
This corruption affects both public and private sectors, influencing resource allocation.
24
Q
What role do politicians play in Nigeria’s economy?
A
They have significant power over resource allocation
Politicians provide operational and policy favors to their associates.
25
What impact does high corruption have on firms in Nigeria?
Firms seek competitive advantage through political connections
## Footnote
This reliance on political capabilities is crucial for navigating institutional challenges.
26
Why are banks a focal point for studying CPA in Nigeria?
The banking industry is highly regulated and politically active
## Footnote
Banks engage more with politicians due to their significant role in the economy.
27
What is the Public Sector Cash Reserve Requirement (PS-CRR)?
A policy introduced by the Central Bank of Nigeria requiring banks to hold a 50% reserve on government agency deposits
## Footnote
This policy affects banks' bottom lines and their interaction with the government.
28
What type of strategies might emerge in Nigeria's complex institutional environment?
Unique and previously undocumented context-fitting political strategies
## Footnote
These strategies are essential for firms to enhance their commercial prospects.
29
What financial policy did the Central Bank of Nigeria introduce in July 2013?
Public Sector Cash Reserve Requirement (PS-CRR)
## Footnote
The PS-CRR was introduced to control bank behavior by imposing a 50% reserve requirement on government agency deposits.
30
What was the reserve requirement for banks on public sector deposits before the PS-CRR was increased in January 2014?
50% reserve requirement
## Footnote
The traditional reserve requirement on other deposits was 12%.
31
What impact did the PS-CRR have on banks' bottom lines?
Reduced interest revenues
## Footnote
Banks relied on public sector deposits for loan creation and profitability.
32
What are the four main drivers of corporate political activity (CPA) identified in the study?
* Commercial and business opportunity
* Regulatory leniency and arbitrary treatment
* Sense of security and protection
* Voice and influence
## Footnote
These drivers are influenced by the dependency of private enterprises on governments.
33
What is the most salient commercial driver of CPA for banks?
Winning public sector deposits
## Footnote
These deposits are crucial for loan creation and profitability.
34
What is a key characteristic of the banking sector in Nigeria regarding deposits?
Public sector deposits are often in non-interest earning current accounts
## Footnote
Banks use these deposits to fund around 70-80% of their risk assets.
35
What is the purpose of engaging in corporate political activity for banks?
To gain regulatory leniency and favorable treatment
## Footnote
Political connections can help with the arbitrary application of rules and reduce penalties.
36
What is the relationship between the Central Bank of Nigeria and political influence?
The Central Bank is susceptible to political capture
## Footnote
Politicians appoint the Governor of the Bank, which can affect supervision.
37
Fill in the blank: The banking industry in Nigeria is influenced by _______ and complex political contexts.
weak institutional
## Footnote
This context affects the strategies banks use for corporate political activity.
38
What type of relationships do banks nurture with politicians?
Long-term connections
## Footnote
Developing social capital with politicians and bureaucrats is crucial.
39
What are the two categories of regulations that banks in Nigeria deal with?
* Procedural regulations
* Transformational regulations
40
How do banks typically respond to procedural regulations?
They are passive and usually address them collectively
## Footnote
Strategies are mostly persuasive and targeted at bureaucrats.
41
What characterizes transformational regulations?
They are game-changing and require active political engagement
## Footnote
An example is the 2013 PS-CRR regulation.
42
What is the Affective strategy in corporate political activity?
Involves recruiting bank officials to emotionally connect with politicians
## Footnote
This strategy is considered unethical and exploits female employees.
43
What does the Financial strategy entail?
Offering preferential financial services to politicians
## Footnote
This may include relaxing due diligence and facilitating corrupt practices.
44
Define the Pseudo-Attribution strategy.
Using CSR for political ends to gain access to politicians
## Footnote
CSR initiatives are targeted at constituencies of focal politicians.
45
What is the Kinship strategy?
Recruiting family members of politicians to establish government links
## Footnote
This strategy leverages community connections for political access.
46
What are procedural regulations concerned with?
Governance of banks and include operational issues
## Footnote
They involve periodic documentation filing with regulators.
47
How do banks approach transformational regulations?
Individually, aiming for exclusive exceptions for competitive advantage
## Footnote
They prioritize influential politicians in their strategies.
48
What is the competitive impact of procedural regulations?
Minimal
## Footnote
Banks do not see high stakes in procedural regulations.
49
What is the primary target of banks when engaging with procedural regulations?
Bureaucrats
## Footnote
These are senior officers of the Central Bank.
50
What drives Nigerian banks to engage in corporate political activity (CPA)?
* Economic outcomes
* Risk management
* Political influence
* Navigating uncertainty
51
What is the relationship between banks and politicians described as?
A win-win situation
## Footnote
Both parties benefit from mutual support.
52
True or False: The affective strategy is considered ethical.
False
## Footnote
It is seen as unethical due to exploitation and bias.
53
What do transformational regulations typically elicit from banks?
Active political engagement
## Footnote
This is necessary due to the high stakes involved.
54
Fill in the blank: The _______ strategy involves using CSR targeted at communities of politicians.
Pseudo-Attribution
55
What is a significant risk associated with the financial strategy?
Money laundering implications
## Footnote
Banks relax due diligence in transactions involving politicians.
56
How do banks exploit the unemployment situation in Nigeria?
By recruiting from politicians' communities
## Footnote
This helps boost re-election chances for politicians.
57
What is a key characteristic of the Kinship strategy?
Recruiting family members of politicians
## Footnote
This establishes a link with the government.
58
What does the Financial strategy reveal about the relationship between banks and politicians?
A two-dependency relationship
## Footnote
Both rely on each other for resources and political access.
59
What is the primary focus of banks in response to transformational regulations?
To receive exclusive exceptions
## Footnote
This is crucial for maintaining competitive advantage.
60
True or False: All CSR initiatives by banks are politically motivated.
False
## Footnote
Not all CSR is politically motivated, but some are used strategically.
61
What is the main consequence of political connections for Nigerian banks?
Protection against penalties and support in legal actions
## Footnote
Political backing is essential in weak institutional contexts.
62
What is the unique aspect of the affection strategy discussed in the text?
Exploiting girls to gain political influence, not to boost sales
## Footnote
This strategy is facilitated by weak institutional protection of women.
63
How do banks use the financial strategy to exert political influence?
By providing preferential financial services to politicians
## Footnote
This goes beyond just donating money to politicians.
64
What does the pseudo-attribution strategy involve?
Targeting CSR initiatives at politicians' constituencies and involving politicians in CSR project design
## Footnote
This strategy shows that political influence may not come solely from being socially responsible.
65
What is the kinship strategy in the context of political connections?
Employing members of politicians' wider communities and constituencies
## Footnote
This strategy goes beyond employing only politicians' close relations.
66
What two main factors influence the choice of political strategy?
Urgency and resources
## Footnote
Urgency captures the need for speed, while resources relate to availability of funds or budget.
67
Which strategies do smaller banks tend to use?
Affective and financial strategies
## Footnote
These strategies present lower costs compared to pseudo-attribution and kinship strategies.
68
Fill in the blank: The _______ strategy takes time to execute as emotions and trust are nurtured over time.
affective
69
What type of strategies do larger banks tend to deploy?
Pseudo-attribution and kinship strategies
## Footnote
These banks have deeper pockets and stronger reputations to support such strategies.
70
True or False: The affective strategy is the fastest to yield results.
False
## Footnote
The affective strategy takes longer compared to financial and kinship strategies.
71
How do banks adapt their political strategies according to outcomes?
Through dynamic portfolio management
## Footnote
Positive outcomes reinforce the choice of strategy, while negative outcomes weaken it.
72
What is a key finding regarding the organization of CPA?
It depends on the type of regulations firms seek to influence
## Footnote
This is a new addition to the literature, previously underexplored.
73
What is the principle of reciprocal interdependence in the context of firms and politicians?
Firms and politicians engage in a social exchange with obligations for each party
## Footnote
This creates a dependency relationship where both sides benefit.
74
What does the term 'political markets' refer to?
Where firms offer what politicians want in return for political favors
## Footnote
This includes money and information.
75
What role does CSR play in the context of Nigerian politics?
It helps firms gain political access and legitimacy
## Footnote
CSR contributes to socio-economic development and serves political roles.
76
Fill in the blank: In Nigeria, competition for political office is often described as a _______ game.
zero-sum
77
What differentiates political CSR from CSR as a political strategy?
Political CSR concerns social impacts related to the functioning of a State, while CSR as a political strategy is driven by reciprocal interdependence
## Footnote
This reflects different motivations and contexts.
78
What motivates banks to orchestrate CPA according to the developed framework?
The quest for commercial opportunities, regulatory leniency, and a voice in policy arenas
## Footnote
This is influenced by the type of regulations being addressed.
79
What do banks exploit in their political strategies?
Reciprocal dependency relationships with politicians
## Footnote
This includes politicians' dependency on funds and goodwill for personal enrichment and re-election.
80
What do politicians depend on for re-election?
Funds and goodwill
## Footnote
These dependencies create a reciprocal relationship between politicians and businesses.
81
What are the CPA strategies mentioned?
* Affective
* Financial
* Kinship
* Procedural
* Transformational
## Footnote
These strategies vary in their approach and effectiveness based on context.
82
What is the main difference between procedural and transformational regulations?
Procedural regulations focus on compliance while transformational regulations aim for broader change
## Footnote
Understanding this distinction is crucial for assessing regulatory impacts.
83
What does the term 'financial pseudo-attribution' refer to?
A strategy that exploits political patronage in relationship-based systems
## Footnote
This strategy is often linked to corruption and unethical practices.
84
What influences banks' choice of political strategies?
* Resource endowment
* Urgency of issues
## Footnote
These factors determine whether banks adopt cost-effective or quick-result strategies.
85
How do CPA outcomes affect strategy choice?
Positive performances reinforce the belief in the optimal strategy, while negative performances weaken it
## Footnote
This cycle impacts future political activities.
86
What role can firms play in combating corruption in Africa?
Strengthening state institutions and instigating institutional change
## Footnote
Collective action through coalitions can empower firms against corruption.
87
What ethical implications arise from the affection strategy?
It could lead to the abuse and exploitation of female workers
## Footnote
This highlights the potential for gender-based exploitation in political strategies.
88
What is a suggested solution for regulating CPA?
Develop industry-wide codes for governing CPA
## Footnote
This can help mitigate unethical political strategies.
89
What do international agencies need to do regarding CPA in Africa?
Support or pressure governments to enact laws that regulate and make CPA transparent
## Footnote
Transparency can reduce corruption and improve business-government relations.
90
What is a significant difference in CPA execution between regions?
African and Asian firms may share motives, but CPA orchestration is nuanced in Africa
## Footnote
This nuance often involves ethical issues like corruption.
91
How might industry-specific political strategies differ?
Each sub-industry may have unique strategies for political access and influence
## Footnote
For instance, the banking industry may employ different strategies than insurance.
92
What is the importance of ethical frameworks in CPA?
They evaluate the rationales, mechanisms, and outcomes of lobbying and political activity
## Footnote
However, these frameworks are often normative and may lack empirical testing.
93
What question remains regarding managers' perceptions of CPA ethics?
How do managers assess the ethicality of their political activity?
## Footnote
Understanding their perspective can enrich discussions on ethics in CPA.
94
What is the main focus of the study regarding MNEs in Libya?
The study explores how market and non-market activity affect foreign firm legitimacy during political turmoil
95
What was a crucial factor for MNEs to succeed in Libya during Qadhafi's rule?
Cultivating strong ties to Qadhafi
96
What additional strategy helped MNEs survive after Qadhafi's overthrow?
Investing in social-benefit projects and social ties with families not associated with Qadhafi
97
How does the pursuit of firm legitimacy relate to political risk?
Pursuing firm legitimacy, especially with social-sector actors, is an effective hedge against political risk
98
What is a 'before–after natural experiment' in the context of this study?
An experimental design that allows for the identification of causal relationships by comparing conditions before and after a significant event
99
What specific industry did the study focus on for analyzing MNEs in Libya?
The construction industry
100
Why were close ties to the Qadhafi regime necessary for MNEs before the transition?
Success in securing contracts depended on these ties
101
What is the dilemma faced by MNEs in politically unstable regimes?
Risk of losing legitimacy by associating with an unpopular government or angering the government by building ties with opponents
102
What did Sun and colleagues suggest regarding MNEs and rival political groups?
Firms should manage relationships between rival political groups in unstable regimes
103
What are two types of behaviors that can strengthen firm legitimacy?
* Market behaviors (e.g., specific projects)
* Non-market behaviors (e.g., lobbying, relationship-building)
104
What does the term 'license to operate' refer to?
The legitimacy and permission for a firm to conduct business in a particular context
105
What can increase the chances of MNEs suffering from political risk?
Close association with an unpopular or fallen government
106
What do MNEs operating in contexts with weak institutions often face?
Volatile control over regulation, resources, and the license to operate
107
What is a mixed blessing of political engagement in volatile contexts?
It can increase profits but also threaten legitimacy if the government loses power
108
Fill in the blank: The political risk literature suggests that MNEs must understand and influence _______.
government policies
109
True or False: The study concludes that MNEs can ignore social-sector legitimacy when operating in politically unstable environments.
False
110
What does the study contribute to the literature on political risk?
Insights into how legitimacy-building efforts directed towards the social sector can mitigate risks
111
What is one of the implications of the study for MNEs facing severe political risk?
Invest in relationships with influential social groups
112
How does the study expand on Boddewyn and Brewer's concept of legitimacy?
It adds a social-sector-based path to MNE legitimacy that may substitute for government-based legitimacy
113
What is a pressing question faced by MNEs operating in politically unpredictable contexts?
How to cope with unpredictability concerning political and institutional rules of the game.
114
What is one way MNEs can cope with discontinuous political risk?
Shape the political environment to create a more favorable context.
115
What is the recommended posture for MNEs operating in weak institutional environments?
Adopt a relational posture toward the government.
116
What are 'boundary-spanning personal and institutional linkages'?
Social and political ties between MNEs and public authorities.
117
What can embedding a foreign firm within the local power structure reduce?
The liability of foreignness.
118
What can happen to the benefits of political embeddedness if the political context shifts suddenly?
They can evaporate or become a liability.
119
What is the risk associated with reliance on political ties?
Dependence on political actors who may increase demands or lose power.
120
What happens to MNEs' operations if their political patrons suffer a political setback?
It can be devastating to their operations and legitimacy.
121
What are the two problems MNEs face in high political risk environments?
Building ties to the ruling regime and preparing for regime change.
122
What is the definition of foreign firm legitimacy?
The ability to earn and maintain a 'license to stay' in a host country.
123
What are the three main types of legitimacy affecting a foreign firm's license to stay?
* Cognitive legitimacy
* Pragmatic legitimacy
* Moral legitimacy
124
What is cognitive legitimacy?
When a firm's existence is taken for granted within the local landscape.
125
What does pragmatic legitimacy derive from?
Meeting the needs of stakeholders.
126
What does moral legitimacy depend on?
Evaluation of a firm's benefits to society according to local norms.
127
What must pragmatic and moral legitimacy be in order to be maintained?
Continually earned and reaffirmed.
128
What factors can MNEs consider to maintain legitimacy in weak political contexts?
* Attention to sociopolitical actors
* Relationship building
* Lobbying
* Product or service quality
129
What is the objective of the study involving Turkish construction MNEs in Libya?
To explore factors contributing to MNE survival in volatile contexts.
130
What constitutes a natural experiment in this context?
A clearly delineated initial state and exogenous treatment while holding variables constant.
131
What was the treatment in the study of Turkish construction MNEs?
The overthrow of the Qadhafi regime during the Arab Spring.
132
Why were Turkish construction MNEs chosen for this study?
To secure data access and because of their long experience in Libya.
133
What varied outcomes did Turkish construction MNEs face during the regime change?
Some suffered looting, while others were protected by local actors.
134
What characterized the actions and fates of Turkish construction MNEs in Libya?
Their long, profitable experience in Libya and close ties with the Qadhafi government.
135
Fill in the blank: The only encompassing ‘institution’ in Libya was the _______.
[Qadhafi himself].
136
What social structure played a critical role in Libya's resistance to central government?
The tribal clan.
137
What was a significant challenge for businesses operating in Libya under Qadhafi?
Unpredictability in governmental actions.
138
Fill in the blank: The economic and political realities in Libya were characterized by weak institutions and _______.
[strong state intervention].
139
What was a significant factor in Qadhafi's ability to maintain power?
Oil money.
140
What was the social structure of Libya's social sector before and after the overthrow of Qadhafi?
Local, interpersonal, and familial connections among family, friends, and classmates
## Footnote
This structure was highlighted by the connections that existed in Libyan society.
141
How did Qadhafi maintain his power in Libya?
By using oil money to improve living standards, change institutional structures, and buy support from tribes and families
## Footnote
This strategy is consistent with literature on countries supported by natural wealth extraction.
142
What role did corruption play during Qadhafi's regime?
Corruption continued to thrive, with family-dominated local government promoting it
## Footnote
Qadhafi's regime was marked by corruption, despite occasional penalties for multinational enterprises (MNEs).
143
What was attractive about doing business in Libya during the Qadhafi period?
Large projects, generous interim payments, and relatively secure accounts receivable
## Footnote
Turkish MNEs found the construction market in Libya lucrative.
144
What strategies did MNEs use to interact with the Qadhafi regime?
Cultivating close ties for permits and payment assurance, varying from relational to transactional approaches
## Footnote
Some firms sought a middle way by working with special purpose agencies.
145
How did the eight MNEs differ in their engagement with the Qadhafis?
They made different choices about project bidding, relationship investments, and proximity to Qadhafi's inner circle
## Footnote
This influenced their overall success and strategy in Libya.
146
What was the significance of the special purpose agencies like ODAC?
They allowed firms to sidestep the JV requirement and offered clearer bidding and contract rules
## Footnote
These agencies were still under Qadhafi's control but provided a structured way to engage.
147
What was the project structure choice for MNEs?
JV with Qadhafis, JV with local firms, special authority contracts, and global consortiums
## Footnote
Each structure reflected risk/reward calculations and negotiating strength.
148
What types of projects did the MNEs engage in?
Private, public, and mixed projects including villas, malls, universities, and infrastructure
## Footnote
DEY and REL focused on private projects, while others worked on public-benefit projects.
149
Fill in the blank: To win contracts in Libya, MNEs had to cultivate close enough ties with the regime to obtain the necessary _______.
permits and permissions
150
What were the two main types of postures MNEs could adopt towards the Qadhafis?
Relational and transactional
## Footnote
Some firms opted for a middle way combining elements of both approaches.
151
How did social ties with local families impact MNEs' operations?
Helped in bidding for projects and ensuring timely job completion
## Footnote
Relationships with local families were crucial for successful operations.
152
What was a major consequence for economic activity in Libya during the treatment period?
It devolved into full-scale conflict, and nearly all economic activity ground to a halt
## Footnote
This included destruction of sites and severe security issues for personnel.
153
What was the impact on cash flows for MNEs during the upheaval?
Disturbances in expected cash flows due to halted economic activity
## Footnote
The impact varied, with some firms experiencing minimal disturbance.
154
What was the significance of the relationships between MNEs and bureaucrats during the transition?
Strong ties helped MNEs like REN collect payments and continue operations despite being proscribed
## Footnote
Political ties were crucial for navigating the new political landscape.
155
Fill in the blank: The primary concern for many Turkish construction MNEs during the revolution was the _______.
safety of their workers
156
What additional factors were analyzed using Boolean Truth Tables?
* International experience
* Firm size
* Existence of international guarantees
* Location of operations
* Investment in post-transition CSR activities
## Footnote
These factors were included to explore potential influences on foreign firms during political transitions.
157
What firm-specific factor might interact with political behavior choices?
Firm size
## Footnote
The interaction of size with political behavior may affect outcomes for MNEs.
158
What are the propositions regarding public-benefit products or services?
* Involvement before a transition enhances resilience
* Involvement after a transition moderates backlash
## Footnote
Prior involvement is speculated to be more effective than post-transition involvement.
159
How do social ties enhance firm resilience?
By engaging with local social-sector actors and building legitimacy
## Footnote
Social ties can influence government through mobilization of non-governmental actors.
160
What is the effect of bureaucratic ties on MNEs during political transitions?
Enhances ability to complete transactions with the government
## Footnote
Bureaucratic ties remain influential even when government changes.
161
What combination of factors is especially potent for MNE resilience?
Public-benefit projects and social ties to bureaucrats or social-sector actors
## Footnote
This combination is more effective than either tactic alone.
162
What is the significance of public actions compared to private words in MNE resilience?
Public actions may have more impact on resilience than social ties alone
## Footnote
This emphasizes the importance of visible commitment to public welfare.
163
What path to firm legitimacy is suggested as a hedge against political risk?
Building social ties and investing in public-benefit projects
## Footnote
These actions can buffer MNEs from political risks, including regime change.
164
What is critical to the success of MNEs in politically uncertain contexts?
Attaining and retaining legitimacy in the eyes of a broad swath of society
## Footnote
This legitimacy can hedge against political risk.
165
What assumption is made about government and corporate political behavior in literature?
The government is a credible counter-party that provides a 'seal of approval' to MNEs
## Footnote
This seal of approval can become a mark of shame if government legitimacy is questioned.
166
How is the legitimacy of MNC operations perceived domestically?
It is tied to the domestic perception of the legitimacy of the institutional framework
## Footnote
This includes the credibility of the government and associated institutions.
167
What are the two paths to MNE legitimacy proposed in the model?
* Government-based path
* Social-sector-based path
168
What enhances MNE's pragmatic legitimacy in the social sector?
Market behavior and non-market behavior directed to various social-sector entities
## Footnote
These interactions contribute to cognitive legitimacy over time.
169
What does the social-sector path to legitimacy suggest during government legitimacy crises?
It may substitute for the government-based path to firm legitimacy
## Footnote
This is especially important in politically volatile contexts.
170
What activities can MNEs engage in to hedge against political risk?
Market and non-market activities designed to cultivate moral and pragmatic legitimacy
## Footnote
These activities should target a broad range of social-sector actors.
171
What does the model indicate about the relationship between market behavior and legitimacy?
Market behavior focusing on societal benefits enhances pragmatic and moral legitimacy
## Footnote
This is crucial during political and institutional turmoil.
172
What should MNEs focus on to improve resilience during political transitions?
Cultivating ties to local families and social-sector actors
## Footnote
This can secure non-governmental sources of legitimacy.
173
What is the importance of market and non-market behaviors for MNEs?
They combine to earn and maintain social-sector-based legitimacy
## Footnote
These behaviors can either reinforce or contradict each other.
174
Fill in the blank: The pursuit of legitimacy in the eyes of the _______ is a hedge against political risk.
[social sector]
175
What is the proposed model's view on the relationship between government and social sector legitimacy?
They are interconnected and can influence each other during times of political change
## Footnote
The model illustrates how legitimacy can be built through both paths.
176
What percentage of executives reported their company was impacted by unexpected political risks in the past year?
More than 90%
## Footnote
This statistic highlights the widespread impact of political risks on businesses.
177
What was the percentage of global executives confident in their company's ability to manage political risks before the pandemic?
74%
## Footnote
This confidence level dropped to 55% after the pandemic.
178
What do 92% of global executives expect regarding political risk in the coming year?
To remain at current heightened levels or to rise further
## Footnote
This indicates a growing concern about political risks.
179
What is one key recommendation for CEOs regarding political risk management?
Identify and collect quantitative political risk indicators
## Footnote
This involves integrating quantitative data into risk identification and monitoring.
180
What should companies invest in to improve their understanding of political risk?
Political risk impact assessment at the functional or business unit level
## Footnote
Regular sharing of these assessments with the C-suite is also recommended.
181
What percentage of global executives integrate political risk management into broader risk management regularly?
Only 23%
## Footnote
This indicates a lack of integration in many organizations.
182
What is crucial for integrating political risk into Enterprise Risk Management (ERM)?
Leveraging quantitative political risk identification outputs
## Footnote
This helps in forming a comprehensive view of external risks.
183
What percentage of companies alter their strategic investments due to geopolitical challenges?
About 80%
## Footnote
This highlights the significant influence of geopolitical factors on business strategies.
184
What is recommended for the C-suite regarding political risk?
Receive political risk training and engage with external subject matter professionals
## Footnote
Active involvement in assessing political risk is crucial.
185
What is the purpose of establishing a cross-functional geostrategic committee?
To govern political risk management across different functions
## Footnote
This helps in aggregating local political risks at a global level.
186
What percentage of companies use a committee to govern political risk management?
Only about 40%
## Footnote
This suggests that many companies may have siloed risk management practices.
187
What do companies that take proactive actions in political risk management experience?
Improved confidence in their ability to manage it
## Footnote
This leads to bolder, growth-oriented strategies.
188
Fill in the blank: Political risks are rising and will continue to have ______ across the enterprise.
impact
## Footnote
This emphasizes the ongoing relevance of political risk.
189
What is a common issue with political risk management in most companies?
It is reactive and disconnected from ERM
## Footnote
This disconnection can hinder effective risk management.
