Policy effectiveness and “misalignment” with firms’ strategies

• Published in: Multinational business review Vol. 22; no. 4; pp. 329 - 350
• Main Authors: Torres, Miguel M, Clegg, L. Jeremy
• Format: Journal Article
• Language: English
• Published: Bingley Emerald Group Publishing Limited 01-12-2014
• Subjects: Design; Economic development; Economic growth; Efficiency; Globalization; Institutionalism; Insurance policies; International business; International organizations; Multinationals; Policy making; Small & medium sized enterprises-SME; Strategy; World War II; Top-down and bottom-up; Internationalization; Outward investment; Policy design; Potential improvement index; Alignment index
• ISSN: 1525-383X; 2054-1686
• DOI: 10.1108/MBR-08-2014-0044

Purpose
– This paper aims to seek to demonstrate that a non-scientific approach to policy design causes policymakers to persist in the development and use of conventional and inefficient “top-down” policies. This paper takes the case of the design of official pro-internationalization policy, intended to promote internationalization through outward investment, to reveal inadequacies and inefficiencies in policy design. Through an analysis of the merits of introducing a “bottom-up” approach, it also aims to show how policy redesign would better yield the desired specific and effective impacts sought by policymakers.
Design/methodology/approach
– A framework was developed, comprising a set of real policy measures, two indexes to quantify the alignment between government policies and firms’ strategies and a regression model to test the impact of the misalignment on firm performance. This framework uses primary empirical data.
Findings
– The results are obtained through an item-by-item comparison between use and revealed, or perceived, importance of each type of public support and then, through the indexes, which rank the different types of incentives according to their importance and use. Analysis of these suggests that some measures could be more efficient, and that firms with higher levels of foreign market commitment tend to be more aligned with public policy, and benefit from it most, while those firms with a lower degree of internationalization are the least well served by policy support measures.
Originality/value
– These results identify systematic weaknesses in policy design and point to the reasons for these weaknesses. The findings suggest that governments tend to craft “top-down” policy, based on high-level presumptions about the nature of all firms’ strategies towards internationalization and international expansion. We propose that these presumptions result from flawed evaluations of policy effectiveness overly influenced by existing foreign investors, to the detriment of the true and intended strategies of the actual target group of the least internationalized firms. It is concluded that to improve both the efficiency and the effectiveness of policy actions, the traditional “top-down” intervention paradigm of policy-making should be complemented by policy designed from the “bottom-up”, making use of reliable information about all firms’ strategies, and taking care to better identify natural target groups of firms according to their existing or potential resources and capabilities.