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Impact | Bridging the gap

Volume 21, Number 6
June 2015

Davin Raiha’s research delves into the integration of market and non-market strategies.

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When we think of business modules, we tend to lean towards the idea of firms molding their market strategies around increasing profit through interacting with customers, suppliers and competitors. The most successful firms, however, recognize the non-market influences and the success that comes from integrating market and non-market strategies.

“A non-market actor is any party that a firm interacts with, where the interaction is not governed by a market mechanism,” said Davin Raiha, Assistant Professor of Business, Economics and Public Policy at Ivey. Raiha primarily studies firms' interactions with political non-market actors such as politicians, legislators and regulators.

The two concepts of market strategy and non-market strategy are often placed under separate umbrellas. But when considered jointly, they can work together to benefit a firm.

Raiha wants to bridge the gap between these two channels by looking at how firms’ market-based actions can have non-market consequences. He is seeking to answer the question: “How can firms make business decisions that fully integrate both market and non-market strategy?”

Originally from Toronto, Raiha completed his undergrad at the University of Toronto, studying commerce, economics, and mathematics. Raiha then went on to the Graduate School of Business (GSB) at Stanford University where he completed his PhD in political economy. It was at Stanford where Raiha gained an interest in the connections between business strategy and politics. His curiosity for non-market strategy developed while working as a Teaching Assistant in an MBA course at Stanford GSB that focused on non-market strategy.

Raiha points out that firms often take market actions that have non-market consequences, regularly making economic decisions that have both economic and political consequences for people and constituencies. 

“If a firm decides it wants to build a factory in a jurisdiction, that’s going to create jobs and generate income for the local economy. Thus, it affects the voters in that jurisdiction, which in turn generates political benefits to the politicians of that jurisdiction. When a firm makes these decisions, they cannot only evaluate their own internalized economic benefits from running its operations, but also understand that it’s going to have additional political benefits to some people,” said Raiha. “In other words, [firms] have to acknowledge that any market decision they would otherwise make also has non-market consequences and spillovers.”

Much of Raiha’s research looks at the intersections of business strategy, public economics, and political science, with a focus on how firms can take market-based actions with a view to influencing political non-market actors. These actions could involve, for example, locating a new factory, choosing a supplier, or increasing investments in a jurisdiction that has a politician the firm wants to influence.

“If a firm was operating in a political vacuum – in a world where there were no non-market forces – it would operate in a particular way,” said Raiha. “The question is: how does the firm’s behavior change once we introduce the political system and non-market forces? My hypothesis is that it changes quite a bit, and that there are actually a lot of business decisions made not only for their market benefits, but also with a significant view to the non-market consequences of those decisions.”

Raiha initially took a theoretical approach to model and analyze how firms can influence political non-market actors through strategic business decisions. The work carefully unpacks what exactly is being exchanged between politicians and firms, as well as the trade-offs that determine how firms will behave and what channels they use to gain influence. Raiha’s current research, which he conducts jointly with Professor John de Figueiredo from North Carolina’s Duke University, looks at the impact that various political structures have on the industrial structure in the U.S.

“We can see how changes in important political variables will influence broadly where investments and economic activity happens within the U.S. by location,” said Raiha.

Raiha hopes that his research will provide managers with a much better understanding of what the business trade-offs entail. He also expects to identify some important channels for lobbying that haven’t been analyzed before.
The main appeal that drew Raiha to Ivey was the Business, Economics, and Public Policy (BEPP) group.

“Ivey is one of very few business schools in the world that has such a strong group in the research area of non-market strategy,” said Raiha, who joined Ivey in 2013. “From a research perspective, Ivey was a perfect fit.”

 

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