Reality or Illusion? The Efficacy of Nonmarket Strategy in Institutional Risk Reduction

Nonmarket strategy researchers have postulated that political and social strategies reduce the exposure of firms to risk, but those arguments have received little empirical attention. In this paper, we integrate social capital and institutional theories to examine the efficacy of managerial political ties (MPT) and corporate social responsibility (CSR) in institutional risk reduction. Using survey data from 179 firms in Ghana, we find that whereas CSR reduces institutional risk exposure, MPT do not. We also find that the effect of MPT on risk exposure is moderated by public affairs functions. Contrary to extant literature, we do not find evidence of complementarity between MPT and CSR. Altogether, the findings do not only show that the proposed efficacy of MPT in risk reduction is illusive, but they also signal the need for scrutinizing the harmony between nonmarket political and social strategies