Status Climbing vs. Bridging: Multinational Stakeholder Engagement Strategies

Multinational corporations seeking to overcome the "liability of foreignness" through partnerships with stakeholders in their overseas markets face an important tension in choosing between two alternative strategies. Firms who build relationships with high-status local stakeholders may experience increased cooperation and reduced conflict with other stakeholders. However, the short-term benefits of this status climbing strategy may be difficult to sustain because stakeholders with low-status, particularly those outside the formal political structure, are more likely to increase their conflict as the firm becomes increasingly distant from them. An alternative strategy of bridging structural holes in the host country stakeholder network also faces theoretical limits as access to scarce information and resources is likely to engender conflict with other stakeholders. The status climbing strategy is more attractive where insider connections dominate (i.e., the rule of law is weak) while the bridging strategy is more attractive in countries with stronger rule of law. In other words, we show that as the rule of law strengthens, multinational entrants focus more on what they know rather than whom they know. Our analyses use a hand-coded data set of almost 52,000 media-reported stakeholder interactions that capture the network of relationships among 4,623 stakeholders from 19 gold-mining companies operating 26 mines in 20 countries, and the evolution of these networks from 1993 until 2008.