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brill.com/hjd

Introduction: Business Diplomacy

Jennifer Kesteleyn

Researcher, Ghent Institute for International Studies (GIIS), Ghent University,

Ghent, Belgium
Jennifer.Kesteleyn@UGent.be

Shaun Riordan

Senior Visiting Fellow, Clingendael Institute, The Hague, The Netherlands

sriordan@clingendael.nl

Huub Rul

Professor of International Business, Windesheim University of Applied

Sciences, The Netherlands; University of Twente, Twente, The Netherlands
hjm.ruel@windesheim.nl

In the modern globalized economy, most firms have little alternative but to
operate abroad. Some seek overseas markets, some cheap labour, others investment opportunities, and yet others the extraction of raw resources. Whatever
the reasons, operating abroad exposes firms to a broad range of geopolitical
and other non-commercial risks. Firms need to identify and manage these
risks to protect their bottom line and to be more competitive compared to
their adversaries. Business diplomacy (BD) offers an approach to geopolitical
and non-commercial risk management that is based on the practices and the
mindset of diplomats. This special issue of The Hague Journal of Diplomacy
explores whether BD exists as a separate area of activity, and how and whether
it is able to meet the challenges faced by firms operating in foreign markets.
In essence, BD occurs when firms do diplomat-like things. It should be
distinguished from other economic-related forms of diplomacy. Economic
diplomacy, for example, is the activity of governments to improve the terms
of trade for their firms.1 Within economic diplomacy, commercial diplomacy
1 
Maaike Okano-Heijmans, Conceptualizing Economic Diplomacy: The Crossroads of
International Relations, Economics, IPE and Diplomatic Studies, in Peter A.G. van Bergeijk,
Maaike Okano-Heijmans and Jan Melissen (eds), Economic Diplomacy: Economic and Political
Perspectives (Leiden: Martinus Nijhoff, 2011), pp. 7-36, at p. 17.

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actively promotes the commercial interests of individual firms, whether

through embassies, trade delegations, or other government-led commercial
promotion activities. In both cases, the key diplomatic actor is the government
or its agents, which primarily defend the general interest of one country. In BD,
it is the firm and its employees that are the prime diplomatic actors, seeking
to secure the profit-making of the company and, in the long haul, its survival.
The distinction between BD and corporate diplomacy and related activities such as corporate social responsibility (CSR), public affairs and public
relations (PR) is more subtle. Corporate diplomacy is not normally limited to
international activities, but may be applied to any of a firms internal relationships in which diplomacy or tact might be called for. Public affairs (including
lobbying governmental and non-governmental stakeholders) and CSR are both
activities that BD may recommend, but are limited in as far as they do not form
part of a holistic long-term BD strategy. The weakness of public affairs is that
by not taking account of the international context in which the firm operates, a
successful lobbying or media campaign in one market may backfire in another.
CSR, which is separated from any general risk-management strategy, strives at
expending resources and goodwill without any direct concrete gains for the
firm. Finally, PR originates from BD. PR involves the direct, short-term communication of a company towards a broader audience. The key distinction of BD
from previous notions is not the actor, or even necessarily specific techniques,
but rather the diplomatic mindset, which seeks to place geopolitical risk management within a coherent and long-term strategic context.
In a sense, BD is not new. For example, the trader traversing the Silk Road of
the early Middle Ages had to be adept in diplomatic skills to negotiate his safe
passage among the multiform centres of political power that he would meet en
route; and both the British and Dutch East India Companies acted as sovereign
governments, governing large territories and serving as diplomatic (and military) actors. However, the range and severity of geopolitical risk confronting
firms in the twenty-first century are increasing, and the number of firms confronted by them is unprecedented.
In recent years, most emphasis has been placed on those risks in a sense
derived from the process of globalization itself. These include the risk to
firms operations and reputation from non-state actors, whose campaigns
are enhanced by new information and communications technology (ICT).
Companies are seldom prepared to handle those digital age crises. More
than one-quarter of the crises spread to international media within an hour.
In contrast, it takes a company, on average, 21 hours to respond. This makes

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them vulnerable to trial by Twitter campaigns,2 which frequently focus on

issues that are on the new international security agenda, such as human rights,
labour conditions, poverty, climate change, or environmental degradation.
Other issues on the same agenda, such as terrorism, financial instability and
organized crime, offer a more direct threat to the firm. A well-known example
is that of piracy, which, as well as the high human cost, imposed an additional
cost of US$ 3.2 billion upon the naval industry in 2013.3 More subtle, but no less
deadly, are the challenges posed by international governance, and in particular the recent spread of national extra-territorial legislation in the commercial
area. The implications of the US Foreign Corrupt Practices Act are still poorly
understood, even by those non-US firms that are subject to it. Since 2002, the
US government has stepped up its efforts when it comes to initiating Foreign
Corrupt Practices Act cases against corporations, and the number of fines and
penalties has increased annually.4
However, an older, more traditionally geopolitical agenda has also been
resurrected. As US hegemony is perceived as weakening, global rule sets fragment and international institutions stagnate. Older threats to companies,
which were once thought long banished, have returned. Firms must now again
confront the risks of expropriation, nationalization and political blackmail, as
well as the direct physical and economic threats of civil war, ethnic conflict
and inter-state war. As the international environment moves from a unipolar
towards a multipolar system, firms will have to navigate between competing
rule sets and value systems. Existing international law may no longer provide
a reliable protection.
Nor can firms always rely on their national governments or embassies. On
the one hand, the nationality of companies has become more fluid, thus making it difficult for them to determine which government or embassy to turn to
for help. On the other hand, governments have to balance a number of interests and priorities. These may not coincide with those of the firm in question.
The firm may be operating in a country where its national embassy carries
little weight, or far away from the capital where the embassy is situated. The
2 Study conducted by Freshfield Bruckhouse Deringer, available online at http://www.freshfields.com/en/news/Half_of_businesses_unprepared_to_handle_%E2%80%98digital_
age%E2%80%99_crises/ (accessed 3 November 2013).
3 Cassie Werber, Piracy Costs Fall, but Its Roots Remain, Says Report, The Wall Street Journal,
4 May 2014.
4 See http://jbsq.org/wp-content/uploads/2010/12/JBSQ_5G.pdf.

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government, or national reputation, may be part of the problem the firm

may not wish to advertise its nationality. Major firms and corporations often
have better access and influence than the national government. Many embassies, which are narrowly focused on commercial work, do not offer the geo
political support that firms need. Moreover, with diplomatic services being
cut as a result of the global financial crisis, many firms are forced to operate
where their national diplomatic service is not present.
This results in firms increasingly having to adopt their own strategies and
practices for the analysis and management of geopolitical risk. These strategies
and practices are familiar to students of diplomacy from their own studies of
both national foreign ministries and their diplomatic networks abroad. They
include the analysis of geopolitical risk and the integration of the results of
this analysis in long-term strategies, the development of contingency plans for
geopolitical and other international crises, the cultivation of networks of influence and intelligence and the formation of alliances, both with governments
and other companies, to secure their intended objectives. These activities
extend beyond political work to consular-like activities, such as the evacuation of staff from crisis situations, and even to activities that are analogous to
military action (such as firms resorting to international legal action to block
vital supplies to a country with which it is in dispute, or military protection for
vessels against piracy). In carrying out these activities, firms face many of the
same problems that are faced by national diplomatic services: the exponential growth of non-state actors, with a corresponding rise of stakeholders who
must be considered both in cultivating networks and geopolitical strategies
and risk analysis, implications of new ICT and social media, and the dangers of
asymmetric resistance tactics.
BD aims to help firms develop those diplomatic capabilities by transferring
the techniques and worldview of the diplomatic strategist to the needs of the
firm. Unlike CSR, BD is not about the image or reputation of a firm, unless that
is central to managing geopolitical risk. BD recognizes that the core objective
of a firm is to make profit. The role of BD is to help ensure that the firms ability
to make profits at an international level is not undermined by geopolitical risk.
BD helps firms to identify both the geopolitical and other non-commercial
risks that threaten the firms bottom line at a global level, but also the international governmental and non-governmental actors that mediate those risks.
Among the latter, it constructs multi-level networks of information and influence. These, in turn, permit the creation of global and regional alliances of heterogeneous stakeholders, built around shared interests, which serve to multiply
the influence of the firm, both positively and defensively. In this way, analysis

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of the geopolitical risk, and the stakeholders that shape it, is integrated into a
holistic strategy to manage them.
Like government diplomacy, BD is not always soft. Some stakeholders can
never be won over they can only be isolated and undermined. Some key
stakeholders need to be pressured to bring them to the table. The construction
of alliances based on networks of stakeholders allows problem actors to be
isolated or put under pressure as part of a broader strategy to secure the firms
objectives.
The challenge for BD, as explored in this collection of articles, is to what
extent this diplomatic viewpoint can bring new insights and understanding
to the operation of firms in the international environment of the twenty-first
century. To what extent does the notion of diplomacy offer better insights
for engaging with foreign (and domestic) civil society and shaping international environments than traditional marketing studies? To what extent does
business diplomacy offer a more nuanced and effective framework for international strategies to secure international objectives than political and governmental lobbying models? If business diplomacy can demonstrate a clear role
in all of these and other aspects of the internationalization of the firm, this
would imply that beyond capabilities and strategies, firms also need executives
with skill sets similar to those of effective diplomats. A further challenge for
business diplomacy will be to identify what the contents of that skill set might
be, and to develop effective and innovative ways of transferring those skills to
the private sector.
This special issue of The Hague Journal of Diplomacy is the culmination of a
fruitful collaboration between scholars and practitioners of BD during a seminar that was held at Clingendael Institute on 30 November 2012 in close collaboration with Ghent University and Windesheim University.5 The articles in
this special issue question the above-mentioned issues from both a theoretical
and practical viewpoint. Theorists question the validity and applicability of
BD by not only placing it in a managerial perspective, but also in the broader
canon of diplomacy studies through original research and case studies.

5 The guest editors would therefore like to acknowledge and thank Jan Melissen and Paul
Sharp for their support while editing this issue. At the same time, we are grateful for the
pleasant cooperation between the contributors and copy editor who made the realization of
this issue possible.

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The first article is provided by Raymond Saner and Lichia Yiu, who, a mere
fourteen years ago, published the first article on BD as interpreted in this issue.6
After a thorough conceptual demarcation of the notion of BD, they provide a
sound argument that business diplomats are best suited to deal with the challenges of implementing international commitments such as signing codes,
charters and guidelines of good conduct. Their contribution substantiates this
contention by means of a careful analysis of the challenges that implementation of the OECD guidelines poses. By doing this, insights are given into how
multinational corporations (MNCs) are able to manage the objectives of a
company and, on the other hand, the requirements for achieving a sustained
business that is based on publically agreed criteria of good conduct.
Next comes Sarah Myers article, which addresses the peculiarities that
internet companies face while operating in China, and their role in shaping
the future of the internet and its governance. Through the attentive examination of three distinct cases, Myers seeks to resolve the question of whether
these particular internet firms use the craft of BD during their negotiations,
and whether or not this is steered by purely commercial and/or diplomatic
motives.
Both contributions derive their strength from the fact that they empirically
demonstrate that BD offers a more nuanced and effective framework to secure
international objectives. Saner and Yius piece does this by showing the advantages that such a framework provides, whereas Myers article looks at what
consequences firms face if they neglect this framework.
Mikael Sndergaards article adopts a more interdisciplinary angle. The
modern corporations organizational structures nourish the necessity of
embracing a diplomatic approach. This is certainly true when it comes to BD
that is, dealing with external non-commercial and geopolitical risks. An
added value of Sndergaards piece is his contemplation on the use of diplomacy as a tool to cope efficiently with potential differences between companies subsidiaries that is, corporate diplomacy. Finally, there is a dissection
of the interdisciplinary nature of the conduct of diplomacy vis--vis the use
of main theories in international business. By doing this, Sndergaard evinces
that by solely adopting a classic economic perspective, latent non-commercial,
geopolitical and cultural sensibilities could arise that could eventually undermine the initial perceived benefits of classic business/management practices.

6 Raymond Saner, LichiaYiu and MikaelSndergaard, Business Diplomacy Management:

A Core Competency for Global Companies, Academy of Management Executive, vol. 14, no.1,
2000, pp. 80-92.

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Finally, two practitioners offer a more hands-on account from the coalface.
James Smalls article provides a detailed account of the step-by-step approach
that a business diplomat can use while defending company interests. It is an
intriguing narrative of how a company is able to align the commercial interests of a particular company with the national interests of a government. The
contribution from George Haynal provides a birds eye view of the increasingly
complex international environment in which companies operate. By adopting
this view, Haynal is able to pull apart the complexity. He unveils a number of
distinguished present-day challenges and ultimately advances some concrete
proposals for how companies could shape their BD.
Based on all these contributions, this special issue of The Hague Journal of
Diplomacy aims to develop further the field of BD studies, which is still in its
infancy. It also aims to overcome the wide gap between International Relations
scholars and those studying international business. Finally, it hopes to foster
links between the business community, academic business schools and the
discipline of political scientists. This is necessary since, as stated earlier, the
global economic arena becomes the norm in which business is conducted.
Geopolitical and non-commercial risks can therefore no longer be managed through purely traditional marketing perspectives. It is only by adopting a more diplomatic mindset that a company will be able to manage these
ever-expanding risks, and safeguard its profit-making and in the long haul its
existence.

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