Sub-theme 20: The business firm as a political actor: A new theory of the firm for a globalized world

Andreas Georg Scherer
University of Zurich, Switzerland
Guido Palazzo
University of Lausanne, Switzerland
Dirk Matten
York University, Canada

Call for Papers

The debate on the relationship between business and politics mainly builds on the assumption of a reasonably coherent regulatory environment, where nation state institutions address issues of public concern and regulate business behavior. In this model state agencies are considered the only political institutions that directly focus on the well-being of society, while business firms are conceived of as economic actors only. Business firms – in this thinking – might well attempt to influence the political system by their lobbying or "political strategies" (Hillman, Keim and Schuler, JOM 2004), or might engage in "corporate philanthropy" as part of their business strategies (Porter and Kramer, HBR 2002). These activities though do not change them into political actors that operate in the name of the public interest. Rather it is assumed that their interaction with the political sphere fosters their economic ends.

Over the last decade, however, this neat separation between the political and the economic sphere has become blurred. In the process of globalization the national context of governance is eroding. In many cases the state system fails in regulating the economy, dealing with transnational social and environmental problems, providing public goods, administering citizenship rights, and serving the public interest. This is particularly true when the public institutions lack the necessary resources or enforcement mechanisms. Under these conditions, civil society groups and private actors often step in and fill the void.

Today, many multinational business firms have started to voluntarily regulate their activities or produce global public goods. As the widespread participation in the UN Global Compact shows these firms assume political responsibilities that once were regarded as belonging to government. They contribute to public health, education, social security, and the protection of human rights, or engage in self-regulation to fill gaps in legal regulation and to promote societal peace and stability. These business firms operate as social entrepreneurs and directly serve the public interest by their resources (money, assets, know how, etc.) and their creativity.

Next to globalization, distinct changes in political ideology during the past decades have led to massive changes in most industrialized countries. Substantial reforms of the post-war Keynesian welfare state – often commonly referred to as 'neo-liberal' reforms – have led to massive privatization of formerly government provided services (e.g., healthcare, basic shelter, education, telecommunication, public transport, water and electricity utilities, etc.). These developments have put corporations in charge of the provision of goods whose nature in terms of quality, accessibility and affordability have an intricately political character.

These activities go beyond the common understanding of instrumental corporate social responsibility and the economic concept of the business firm. Globalizing society erodes established ideas about the division of labor between the political and economic spheres and calls for a fresh view concerning the political role of business in society and its creativity and contribution to social innovations and the public good. These phenomena need to be embedded in a new concept of the business firm as an economic and political actor in market societies.

As outlined above, while there is a broad consensus on business occasionally 'doing' political activities, there is as yet little appreciation of business actually 'being' a political actor in itself, next to governments and increasingly also civil society actors. The political nature of the firm is highly contested – partly because it challenges existing notions of the role of business in society, but also because of substantial concerns about the implications of this shift for democracy and the public good (Matten and Crane, AMR 2005; Scherer and Palazzo, AMR 2007).

The task for this workshop is to discuss the consequences of a political mandate of the business firm and to examine the implications for the theory of the firm. We specifically invite papers which take a critical perspective on the political role of the firm. We would like to see the workshop group advance the discussion in two main directions that address the philosophical, theoretical, and practical domains:

1. Theoretical concepts of a political theory of the business firm

Papers here might address questions such as the following:

  • Do companies have a political responsibility and if so how can it be defined?

  • What does "political behaviour" mean in a globalizing world?

  • How can we find a balance between corporate power and the public interest?

  • How can the link between organizational creativity and social innovation be conceptualized and explored?

  • How can the activities of companies be democratically controlled? What are the consequences for corporate governance?

  • What are the problems caused by corporate political strategies and political lobbying?

  • What are the consequences of a political conception of corporate social responsibility for the mainstream economic theory of the firm?

2. Implications for organization theory building

Possible topics might include (but are not restricted to) the following:

  • What role do organizational creativity and resources play for social innovations?
  • What are the consequences of the political role for organizational legitimacy?
  • What can be learned from the emerging forms of cooperation between business firms, NGOs and civil society groups (e.g. with respect to private-public-partnerships)?
  • How can responsible leadership contribute to social innovations?
  • Which organizational structures or incentive systems support social innovations?
  • How do business firms try to deal with their enlarged political role (best practices)?

We invite both theoretical and empirical contributions that help us to better understand the political responsibility of business firms. Papers that argue across the potentially relevant disciplines (organization studies, business ethics & CSR, legal studies, political theory, etc.) would be particularly welcome.

Andreas Georg Scherer 
Guido Palazzo 
Dirk Matten