Business and Socio-Political Interaction in International Service Projects: The Case of Brazil.

Author:Hadjikhani, Amjad
Position:RESEARCH ARTICLE - Report

1 Introduction

Fierce competition in foreign markets has encouraged multinational enterprises (MNEs) to engage in solving social problems since this can leverage business profits and, at the same time, increase MNEs' legitimate position to non-business actors. Service MNEs, especially the ones belonging to the ICT (Information and Communication Technology) industry, have the potential to promote social progress with technologies that create inclusive growth, and increase business efficiency and innovation, mainly in developing markets (World Bank 2016). These MNEs increasingly provide technologies and services that contribute to societal improvements such as the development of applications in education, health and transportation, to name a few. Services developed through ICT technologies can also reduce the growth disparities between rural and urban areas (World Bank 2016) and have the potential to impact a country's development when it comes to issues such as environmental sustainability and poverty reduction, which is in line with the United Nation's millennium goals. As will be illustrated in this paper, the mitigation of such problems creates interdependence between private and public interests, and it becomes crucial to balance the interests that such cooperation between business and non-business actors may generate.

The increasing interchange between MNEs and non-business actors in recent years has attracted researchers studying the internationalisation of industrial firms. But despite the increasing role of pure service or services connected to products, research on how these MNEs manage their social and political environment has remained almost non-existent (Ghauri et al. 2012). Disregarding whether those in question are industrial or service firms, researchers like Polonsky and Jevons (2009), Hadjikhani et al. (2012) and Marquina and Morales (2012) have a general consensus that the management of social and political environments is the key marketing strategy that influences competition, market image and success in entry and expansion into foreign markets (Ghauri et al. 2012). Hence, relationships with socio-political actors are particularly relevant for service MNEs that operate globally and often find themselves embedded in a network structure containing both business and nonbusiness actors (Jansson et al. 2007). Although the management of socio-political relationships has been recognised as an important strategic tool to help MNEs build legitimacy at home and in host markets (Hadjikhani et al. 2008), the interaction between business, policy makers and society remains underexamined in international service marketing, at least in comparison to the traditional networks of industrial firms.

When studying the internationalisation of service firms, researchers have focused on issues like the connection between internationalisation and the degree of intangibility or types of services. Considering the heterogeneous nature of services, researchers question whether theories concerning the internationalisation of goods can equally be used for all services and the following four idealised types have been suggested (Clark and Rajaratnam 1999): (a) contact-based services (such as consultancy services), (b) vehicle-based services (such as communication via wires and satellite, (c) asset-based (such as banks) and, (d) object-based (services integrated with physical objects). This paper concerns projects with an object-based mode of internationalisation, where MNEs in ICT projects promote social progress with electronic technologies creating inclusive growth, business efficiency and innovation.

Following the call from researchers, as well the increasing role of the service industry in the world economy (according to UNCTAD 2014, the service sector accounted in 2010 for 66.3% of global GDP), this paper contributes further knowledge on how firms in the service industry manage their relationships with sociopolitical actors in foreign markets. Research examining such relationships within international business and management literature tends to focus on the macro-level of activities commonly anchored on an MNE's internationalisation phase (e.g., contact with host governments, trade associations, etc.). However, as Salmi and Heikkila (2015) state, studies focusing on strategic activities are necessary when MNEs already have an established position and an ongoing business activity in a foreign market. So, our research question is: How do established international service firms cooperate with business and non-business actors to expand in the local foreign market? Building on empirical data from Brazil, the purpose of the paper is to present a theoretical view for studying service MNEs in international projects, and hereby contribute with further understanding of the interaction between the three actors--MNEs, society and political. By including both social and political actors in the business network, the study enhances our comprehension of firms' entire market behaviour (Hadjikhani et al. 2016; Ring et al. 1990).

Building on a business network perspective, a theoretical view is presented and applied to the analysis of two ICT projects in Brazil. The theoretical framework consists of the four interrelated concepts of cooperation, legitimacy, commitment and knowledge and permits inclusion of the three heterogeneous actors into one united pattern for further understanding of their behaviours. The case analysis shows how these actors cooperate and solve conflicts despite their differing goals. The empirical illustration also contributes with knowledge to service MNE literature by presenting complex relationships where differences in goals, values and organisational practices require managerial abilities to minimise conflicts, and leverage business opportunities. The socio-political context also provides managerial implications to practitioners, who gain a more systematic understanding of their relationships in the political arena. While our main concern will be MNEs' cooperation with public officials, interactions with civil society represented by NGOs (non-governmental organisations) will also be taken into account.

After a short summary of earlier contributions and a presentation of the conceptual framework, a method section follows where our qualitative study including two cases is described. The cases involve service MNEs within the ICT industry from Sweden, Spain, China and Brazil, working together with public officials and NGOs to improve public service in two Brazilian cities. We end the paper with a conclusion showing the complexities of relationships forming public-private interactions in service MNEs.

2 Earlier Contributions

In the introduction, we have pointed to the importance of studying firms interactions with non-business actors in an emerging market context. But how much research has been done within this area in the last decade? A search in Business Source Complete (2018), an extensive database covering more than 2100 active, full-text journals within business and economics, reveals the following for the period January 2010-June 2018: (The search was limited to peer-reviewed academic articles).

As can be seen in Table 1, almost 2800 articles deal with the internationalisation of companies, while fewer--584--have a focus on service firms. When 'internationalisation of firms' is combined with 'emerging markets' 379 articles are identified, while the number decreases to 67 when related to service firms. From the table it is also clear that more articles are dealing with 'social' rather than 'political' aspects and that only one article is found when 'internationalisation of firms/service firms', 'emerging markets' and 'sociopolitical' are combined. The article 'Internationalization Through Sociopolitical Relationships: MNEs in India' by Elg et al. (2015) was published in 2015 and the authors point to the importance of more empirical studies, including MNEs from varying countries.

Hence, this study encounters the three research paths of MNEs in services, politics and society in an emerging market context. As indicated in the table above, each of these paths has attracted a number of researchers, though each with a different theoretical and empirical basis. A service can be defined as internationalised when it operates in a foreign country, employing one or more of the four classifications stated in the introduction. The classifications further determine if and how the services become interconnected to business, society and political issues in foreign countries. Given the diversity in the nature of the service, internationalisation researchers state that no single theory is likely to be correct (see for example Richardson 1987). Authors like Clark and Rajaratnam (1999) connect the selection of a theory to the types and nature of services. In this vein the internationalisation model becomes related to the degree of, (a) intangibility, (b) heterogeneity, (c) perishability and (d) inseparability. While the first type (contact-based) presents the classic nature of services and interaction, the other types allow producers to be present without actually crossing national borders. But governments try to exercise a form of control, for example, in how information or communication is transmitted across their boundaries (Ross and Crossan 2012). ICT projects are mostly object-based, and the social goals are driven by mutuality and interdependence among the involved parties.

Earlier theoretical contributions related to the topic of this paper are studies of governments' coercive or/and supportive actions. The studies range from the presumption that management is a function of a response to the political environment (Cui and Jiang 2012; Meyer et al. 2014), to the design of coping strategies. The coping strategies view is often dealt with as the management of risk (Miller 1992), country risk ratings (Cosset and...

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