By Dr. Huub Ruël, Windesheim University of Applied Sciences – Zwolle.
Multinational corporations (MNCs) operate in a complex international business arena. They face various global, national and local pressures and requirements from various stakeholders while increasing their presence in countries and markets around the world. Governments as well as non-governmental organizations need to be dealt with and to succeed, MNCs need the ability to manage complex interactions in order to gain and maintain a ‘license to operate’ and legitimacy in a foreign business environment.
As a result more and more MNCs actively conduct business diplomacy to establish and maintain long term relationships with various stakeholders. MNCs pro-actively seek dialogues, interact, and negotiate with foreign local authorities, and at the same time they need to be sensitive to the wishes and demands of the increasing number of local and international NGOs that monitor global companies as they conduct business. Working conditions, environmental standards and employment practices should all be taken into account to prevent conflicts that can affect an MNC’s reputation.
In order to get a more in-depth picture of how MNCs conduct business diplomacy, we interviewed high-level representatives of eight large, Dutch MNCs.
We found that seven out of the eight MNCs conducted business diplomacy intensively. None of them applied a clear and organization-wide business diplomacy policy, but general guidelines existed in five MNCs. In all MNCs, the responsibility for business diplomacy was largely decentralized to the foreign subsidiaries. All MNCs deployed a wide range of business diplomacy means: direct stakeholder dialogues, events, forums, meetings, industry associations, social projects and social partnerships.
The findings of our study further suggest that industry-specific factors affect the business diplomacy intensity of MNCs and that firms operating in countries with weak institutions recognize the importance of business diplomacy more and hence implement it more intensively.
MNCs clearly have entered the diplomacy arena and are there to stay. This has an impact on ´traditional´ diplomacy and on the way diplomats work and are able to achieve results in today´s international relations.