Baron Diermeier (2006) - Strategic Activism And Nonmarket Strategy

• This page is referenced in BPP Field Exam Papers

Reference(s)

Baron, D. and D. Diermeier (2007), Strategic Activism and Nonmarket Strategy, Journal of Economics and Management Strategy 16, 599-634. pdf (2006 Draft Paper pdf)

Abstract

Activist NGOs have increasingly foregone public politics and turned to private politics to change 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 the activist and the 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, fighting a campaign, and credible commitment.