Strategies for firm success in the face of government influence 2

Hello. I'm Prof. Anna Grosman from Loughborough University in the United Kingdom. Today, I will talk about state capitalism, and I will continue with Part 2 of the strategies for firm success in the face of government influence.

One way the states have been active in their nudging of foreign states is through the discrete power strategy. The best way to achieve that is by sending their own state-owned entities abroad. What I wanted to emphasize is that broadly speaking, we could visualize these types of strategies in four types of categories, depending on whether the governments are primarily pursuing an orientation that's looking more inward. So strategies that are more local to their own countries, or an orientation that's more outward, i.e., the strategy that's looking to boost the country's standing with other countries abroad, and also whether the goal that these governments are trying to achieve is more on a social spectrum, or more on the economic side of things. These dimensions the orientation and the type of goal will give us four broad categories in which we can visualize the discrete power strategies by a given state. If we're looking at a recognition type of strategy, so that's an inward-looking strategy that looks at strengthening the local economy, and at the same time, primarily with a social goal, this could be achieved by the government using state-owned multinationals, so those companies that are already positioned in other countries, and sovereign wealth funds to improve the country's own recognition by other countries. An example of that type of strategy would be, let's say, Qatar using their own sovereign wealth fund, Qatar Investment Authority, to buy a stake in Turkiye's stock exchange, so that would essentially reinforce the standing of Turkiye with its own economy and also it would have more of a social goal in terms of helping Turkiye with the stabilization of its own market. If we are looking at an outward strategy with a social goal. That would be where the government uses state-owned multinationals and sovereign wealth funds to spread its own ethical and social values abroad or to other countries. A typical example would be how this is done by Norway. Norway runs a very big sovereign wealth fund called Government Pension Fund Global. This fund only invests in companies that would comply with Norway's own ethical and sustainable standards. The minute the company in which they invest abroad has been in breach of these ethical standards, the fund will publicly announce divestment from these companies. In such a way, this is more of a subtle way of spreading Norway's values abroad. It fulfills a strategy of Norway's government, an outward strategy with a social goal. As an example, if we're looking at an outward orientation, but more of an economic goal would be a supremacy strategy. Where the government uses state-owned multinationals and sovereign wealth funds to achieve supremacy in other countries. A typical example would be when Russia's state-owned oil and gas company, Gasprom, invested in developing a pipeline going all the way to Germany, but that bypassed Ukraine. Therefore, Russia's government has achieved this strategy of supremacy over the Western European Bloc and at the same time penalized Ukraine. This has, essentially, an outward orientation and an economic goal at the same time. Finally, if we look at another type of economic goal that looks more inward, which we call a development strategy where the government uses state-owned multinationals and sovereign wealth funds to facilitate the country's development, its own development. An example of that would be the Indian government mandating its state-owned companies that are dealing with minerals to buy strategic assets abroad, such as lithium and cobalt mines so that the capacity of building electric batteries that use lithium and cobalt would be more controlled. The supply chain will be controlled over different stages, and therefore, there is a reinforcement of Indian economy towards the electric car manufacturing.