david baron
STRATEGIC ACTIVISM AND
NONMARKET STRATEGY
David P. Baron and Daniel Diermeier
Stanford University and Northwestern University
ABSTRACT
Activist NGOs have increasingly foregone public politics and turned to private politics to force change in the practices of firms and industries. This paper focuses on private politics, activist strategies, and nonmarket strategies of targets. A formal theory of an encounter between an activist organization and a target is presented to examine strategies for lessening the chance of being a target and for addressing an activist challenge once it has occurred. The encounter between and activist and a target is viewed as competition.
At the heart of that competition is an activist campaign, which is represented by a demand, a promised reward if the target meets the demand, and a threat of harm if the target rejects the demand. The model incorporates target selection by the activist, proactive measures and reputation building by a potential target to reduce the likelihood of being selected as a target, and fighting a campaign. The supply of activism and the inherent free-rider problem are considered as are target strategies to reduce that supply.
1
STRATEGIC ACTIVISM AND NONMARKET STRATEGY
David P. Baron and Daniel Diermeier
Stanford University and Northwestern University
1. Introduction
Political and social activists are an increasingly important component of the environment of business. The goal of activism typically is to influence firm and industry practices, often motivated by social or ethical concerns. To change the practices of potential target firms, activists engage in private and public politics. Public politics strategies focus on advancing the activist’s agenda in public institutions such as legislatures, executive agencies, or courts. Many activists have concluded that public politics is too easily blocked and have turned to private politics instead. Private politics refers to actions by
NONMARKET STRATEGY
David P. Baron and Daniel Diermeier
Stanford University and Northwestern University
ABSTRACT
Activist NGOs have increasingly foregone public politics and turned to private politics to force change in the practices of firms and industries. This paper focuses on private politics, activist strategies, and nonmarket strategies of targets. A formal theory of an encounter between an activist organization and a target is presented to examine strategies for lessening the chance of being a target and for addressing an activist challenge once it has occurred. The encounter between and activist and a target is viewed as competition.
At the heart of that competition is an activist campaign, which is represented by a demand, a promised reward if the target meets the demand, and a threat of harm if the target rejects the demand. The model incorporates target selection by the activist, proactive measures and reputation building by a potential target to reduce the likelihood of being selected as a target, and fighting a campaign. The supply of activism and the inherent free-rider problem are considered as are target strategies to reduce that supply.
1
STRATEGIC ACTIVISM AND NONMARKET STRATEGY
David P. Baron and Daniel Diermeier
Stanford University and Northwestern University
1. Introduction
Political and social activists are an increasingly important component of the environment of business. The goal of activism typically is to influence firm and industry practices, often motivated by social or ethical concerns. To change the practices of potential target firms, activists engage in private and public politics. Public politics strategies focus on advancing the activist’s agenda in public institutions such as legislatures, executive agencies, or courts. Many activists have concluded that public politics is too easily blocked and have turned to private politics instead. Private politics refers to actions by