My Best Frenemy - International Non-Market Strategies and Corporate Diplomacy: Standard Oil of New Jersey and the Panama Reparations
This paper advances the concept of international nonmarket strategy to study actions by multinational corporations (MNCs) to influence the diplomatic and political relations between their home country and the host country. We maintain that the MNC can use its business and political networks at the home country to increase the host government’s bargaining power vis-à-vis the home and obtain business benefits in return. The MNC’s capabilities to have political influence at the home country, however, can also become a source of risk: a host government can have the incentive to use the MNC’s sunk assets in the host country as ‘hostages’ in order to have the MNC use its political capabilities on its behalf at the home country. We illustrate this argument with the historical case of the role played by Standard Oil of New Jersey in the negotiations between Colombia and the United States over the reparations for the loss of Panama in the 1920s. The paper shows the implications to international business theory and the benefits of using historical evidence.
