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This paper outlines an approach for understanding the role of multinational corporations (MNCs) in global governance. We develop a typology of regime types with two dimensions, the goal of the regime, which can be market enabling or regulatory, and the location of authority, which can be national, regional, or international, with public and private elements. MNCs tend to support the creation of market enabling regimes at the international level, and prefer to keep social or environmental regulation under national or private authority. However, these are only generalizations and MNCs develop preferences based on their relative influence in various arenas, the costs of political participation, and competitive considerations. We argue that institutions of global governance represent the outcome of a series of negotiations among corporations, states, and non-state actors. The preferences and power of MNCs vary across issues and sectors, and from one negotiating forum to another, accounting for the uneven and fragmented nature of the resulting system. Our approach differs from the traditional FDI bargaining framework in that it recognizes the multi-party nature of negotiations and multiple sources of power. Moreover, the complexity and dynamic nature of the process results in a somewhat indeterminate process.
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Business and Politics, Vol. 5, No. 2, August 2003
Bargains Old and New: Multinational
Corporations in Global Governance
University of Massachusetts, Boston, University of Washington-Seattle
ABSTRACT This paper outlines an approach for understanding the role of multinational corpora-
tions (MNCs) in global governance. We develop a typology of regime types with two dimensions,
the goal of the regime, which can be market enabling or regulatory, and the location of authority,
which can be national, regional, or international, with public and private elements. MNCs tend
to support the creation of market enabling regimes at the international level, and prefer to keep
social or environmental regulation under national or private authority. However, these are only
generalizations and MNCs develop preferences based on their relative influence in various arenas,
the costs of political participation, and competitive considerations. We argue that institutions of
global governance represent the outcome of a series of negotiations among corporations, states,
and non-state actors. The preferences and power of MNCs vary across issues and sectors, and
from one negotiating forum to another, accounting for the uneven and fragmented nature of the
resulting system. Our approach differs from the traditional FDI bargaining framework in that it
recognizes the multi-party nature of negotiations and multiple sources of power. Moreover, the
complexity and dynamic nature of the process results in a somewhat indeterminate process.
International regimes are a critical element of global governance. Regime theory
has been widely criticized for its state centered approach, and increasing
attention has been paid to domestic political factors and non-state actors,
especially non-governmental organizations (NGOs).
Very few, however, have
examined regimes from the perspective of multinational corporations (MNCs),
despite their critical influence in the international political economy. Drawing on
international business and international political economy literatures, this paper
outlines an approach to analyzing regimes from the perspective of MNCs. In
doing so, we build upon the work of Raymond Vernon, whose Product Life
Cycle theory of trade and investment moved the conceptual spotlight from
nations to corporate strategy.
In this tradition, we seek to understand the
formation and content of regimes of international governance in terms of the
interests and strategies of MNCs.
* Correspondence: David L. Levy, Professor, Department of Management, University of Massachusetts,
100 Morrissey Boulevard, Boston, MA 02125, USA. Tel: (617) 287-7860; E-mail:
1. Higgott, Underhill and Bieler (1999); Strange (1996).
2. Vernon (1966).
1369-5258 print/ISSN 1469-3569 online/03/020131-20 2003 Taylor & Francis Ltd
DOI: 10.1080/1369525032000125358
David L. Levy & Aseem Prakash
The increasing internationalization of production and markets over the last
several decades, however uneven and incomplete, has been accompanied by the
emergence of various forms of supranational/global governance, both at regional
and international levels. From regional trade agreements to international environ-
mental treaties, we are witnessing the emergence of multilateral institutions and
sources of authority that increasingly influence the operations of multinational
corporations (MNCs). Even in the absence of a supranational authority, negoti-
ations among governments, firms and NGOs are leading to the establishment of
regimes—rules, norms, codes of conduct, and standards—that constrain, facili-
tate, and shape MNCs’ market behaviors.
In recent debates, three arguments have frequently been made, often implic-
itly, concerning the power and preferences of MNCs in relation to institutions of
global governance. The first argument is that the power of MNCs to shape
outcomes has increased in relation to governments and other societal actors (the
decline of the Westphalian state hypothesis). The second is that MNCs prefer to
see regulatory authority shift away from national governments and toward
supranational institutions, and that this shift has, indeed, been underway (the
decline of the regulatory state hypothesis). The third is that, as part of the MNC
agenda, supranational regimes facilitate the lowering of regulatory standards
across jurisdictions, particularly in the areas of labor, environment, health and
safety (the race-to-the bottom hypothesis).
This paper critically examines these arguments. We find that MNCs are not
always seeking the extension of supranational regimes to lower regulatory
standards; indeed they sometimes seek to enhance domestic governments’
capacities to establish stringent regulations. Moreover, the complexity and
dynamic nature of regime bargaining processes, combined with strategic behav-
iors by MNCs, NGOs, and governments, lends a degree of indeterminacy to
regime formation processes. Consequently, MNCs’ goals and interests vary
across issues and sectors, and MNCs do not always achieve what they want. We
explore the preferences of MNCs through a new typology of regimes. We
identify key elements of a new version of the MNC-state bargaining theory,
which serves to shed light on the ability of MNCs to secure the type of regime
they desire. The paper thus examines MNCs’ preferences and power regarding
international regimes.
A typology of regimes
Regime theory, which has attempted to explain the emergence and diversity of
supranational institutions of governance, could usefully inform our understand-
ing of the role of MNCs in the structuring of international governance.
themes in this literature relate to the conditions under which regimes arise, their
function, and how they affect collective outcomes. Developed to explain the
institutionalized mechanisms of international co-operation within an anarchic
world, regime theory has come to employ a notion of governance that is similar
3. Haggard and Simmons (1987); Keohane (1983).
4. Young (1994).
Multinational Corporations in Global Governance
to that used by students of domestic politics. In his widely used definition,
Krasner posits that regimes are “implicit or explicit principles, norms and
decision-making procedures around which actors’ expectations converge in a
given area of international relations.”
In a similar vein, Keohane has defined
regimes as “persistent and connected sets of rules and practices that prescribe
behavioral roles, constrain activity, and shape expectations.”
Notable in these
and other definitions is the recognition of cognitive and normative dimensions of
ordered international conduct, and their abstraction from specific organizational
forms. Young emphasizes this distinction between governance, “in the sense of
rules of the game that serve to define social practices, assign roles, and guide
and specific organizations as “material entities possessing offices,
personnel, budgets, equipment, and more often than not, legal personality.”
Much of regime theory has concentrated on describing the processes by which
states agree to give up sovereignty in policy areas through the implementation
of international agreements. In this paper, we propose that MNCs are key actors
in the formation of governance regimes and that corporate strategies play an
important role in the trajectory of regime development. In particular, David
Baron has argued that firms need to develop an integrated strategy encompassing
both their market and non-market environments.
Specifically, firms need to
examine how a regime bestows benefits or imposes costs in relation to their
market competitors, and consider how a regime influences the balance of power
in relation to non-market actors such as NGOs.
Negotiations over institutions of governance give rise to regimes that vary in
two key dimensions that matter to MNCs, regime purpose and regime authority
structure. The first dimension relates to whether the primary objective of the
regime is either market liberalization by expanding market opportunities and
reducing transaction costs, or the imposition of regulatory constraints for
environmental, social, or other purposes.
Firms are generally viewed as
supportive of market-enabling regimes, such as the General Agreement on
Tariffs and Trade (GATT) and now, the World Trade Organization (WTO),
under whose auspices the liberalization of international trade has proceeded
apace during the last five decades. Of course, creating opportunities for some
firms may present threats for others. Typically, firms in protected or inefficient
sectors oppose trade liberalization, with the recent campaign by the US textile
industry against relaxing the Multi-Fiber Agreement round being a case in point.
Social and environmental regulation, by contrast, is generally viewed as im-
posing constraints on business, restricting market opportunities for MNCs and
creating costly compliance requirements. For example, the Basle convention
restricted international trade in hazardous waste and the Montreal Protocol
phased out production and trade of ozone-depleting chemicals. While many
5. Krasner (1983) p. 2.
6. Keohane, Haas and Levy (1993).
7. Young (1994) p. 4.
8. Young (1994) p. 15.
9. Baron (1995).
10. Levy and Egan (2000) refer to these regime types as “market-enabling” and “regulatory”.
David L. Levy & Aseem Prakash
TABLE 1. New bargains: a typology of regimes
Regime purpose
Location of authority Market enabling Regulatory
Domestic Trade-related intellectual ISO 14001,
property rights Forest Stewardship Council
Supranational World Trade Organization Montreal Protocol on
Ozone Depleting Gases
Nuclear Non-Proliferation Treaty
firms are expected to oppose such regulatory regimes, particular competitive
concerns can alter the situation.
The second dimension of our regime typology pertains to the regime’s
authority structure, specifically the location of authority for monitoring compli-
ance and enforcement of regime provisions. In particular, we are interested in the
location of authority that monitors and enforces rules influencing MNCs’
sourcing, operations, sales, and profitability. This authority can be located at the
national or supranational (regional or international) levels. Furthermore, this
authority can be vested with state or private actors. Authority structures can also
be complex and hybrid. Public law may provide for private monitoring and
enforcement. To illustrate, the provision of private attorneys-general in the
American environmental jurisprudence enables private actors to prosecute firms
for alleged environmental violations and even recover costs of litigation. Inter-
national environmental regimes generally have some monitoring mechanisms
under the auspices of supranational institutions, but much of their implemen-
tation and enforcement is at the national level.
Together, the two attributes, regime purpose and regime authority structure,
yield a matrix of four analytical regime types: market enabling-domestic, market
enabling-supranational, regulatory-domestic, and regulatory-supranational (Table
We briefly discuss MNCs’ preferences for these regime types below. Our key
argument is that to understand MNCs’ support or opposition for a particular
regime type, one has to examine MNCs’ perceptions of their relative influence
versus other actors across governance arenas as well as the competitive implica-
tions of specific regimes.
Regime purpose
The WTO and the now-stalled Multilateral Agreement on Investment (MAI) are
examples of market-enabling regimes, which tend to reduce transaction costs and
provide collective goods important to MNCs, such as standards, multilateral
recognition, and enforcement of Intellectual Property Rights (IPRs). As Lake has
remarked concerning the MAI and WTO, “governments are constrained from
Multinational Corporations in Global Governance
exercising sovereign powers but no higher authorities are created—in each case,
further widening the private sphere.”
On the face of it, MNCs should support market-enabling regimes. However,
while some sectors, such as banking, pharmaceuticals, agriculture, and electron-
ics, have been strong supporters of multilateral market-enabling agreements,
others, notably the automobile industry and some consumer appliance firms,
have preferred a strategy of regional integration, such as that offered by NAFTA.
This regional approach offers companies a route to reconciling the potentially
conflicting objectives of rationalizing production and implementing lean pro-
while providing a degree of protection against European and Japanese
Moreover, firms operating in highly regulated markets sometimes
oppose the dismantling of regulations.
The railroad and trucking industries are
classic examples of how regulations can serve as a barrier to entry.
MNCs may also oppose the expansion of a market-enabling regime if it puts
them at a competitive disadvantage. The recent dispute between the European
Union and the United States over China’s entry to the WTO included the
proposed rules for entering China’s insurance industry. China wanted to require
foreign insurance companies to have joint ventures with local companies. The
American insurance giant, American Insurance Group (AIG), however, already
had a presence in China and was exempted from this requirement. European
MNCs feared that this provided a competitive advantage to AIG, so they lobbied
their governments to hold up China’s entry in the WTO till rules were modified
to provide a more level playing field.
Regulatory regimes are primarily designed to impose constraints on aspects of
corporate behavior, including sourcing, production, sales, and distribution of
profits. These types of regimes typically address the social costs of corporate
operations and provide collective goods, such as environmental improvements
and worker safety. Examples include the 2000 Cartegena Protocol on Biosafety,
the 1997 Kyoto Protocol to reduce emissions of greenhouse gases, and various
proposals for codes of conduct regarding labor standards and the environment.
Many regimes have a complex, hybrid nature, which requires decomposition
for the sake of analysis. Regulatory regimes whose primary purpose is to
constrain MNC behavior may generate new markets that did not previously exist.
For example, the Kyoto protocol, which regulates the emission of carbon dioxide
and other greenhouse gases, will establish global markets for carbon trading
among firms and countries. Such markets, which create opportunities for
companies to invest in low-emission technologies, have not existed before
because the global atmosphere has been treated as an open access resource.
Regulatory regimes can also facilitate trade through the harmonization of
technical and environmental standards.
11. Lake (1999) p. 47.
12. Levy (1997).
13. Eden and Molot (1993).
14. Stigler (1971).
15. Kolko (1963).
16. Chandler (2001).
17. Haufler (2001).
David L. Levy & Aseem Prakash
Market enabling regimes frequently have regulatory features. Regional trade-
liberalization agreements such as the European Union and NAFTA both have
market-limiting components advocated by specific sectors; the local-content
requirements for the auto industry in NAFTA are a case in point.
side agreements on labor and the environment, though generally viewed as
weak, represent regulatory elements adopted to accommodate social pressures.
The governance of intellectual property rights (IPRs) is another example of
a complex, hybrid regime. The enforcement of IPRs can represent a form
of protectionism for MNCs that constrains competition, though the establishment
of property rights also has a market-enabling dimension by encouraging invest-
ment in new technologies and trade in resultant products. For example, a key
factor in the historical development of the Indian pharmaceutical industry was
the ability of Indian firms to manufacture pharmaceuticals, as long as they
bypassed patents held by Western MNCs by adopting different manufacturing
processes. The TRIPS agreement closed this ‘loophole’, thereby expanding
markets for MNCs at the expense of local pharmaceutical firms in developing
Arguably, MNCs will oppose the formation of international regulatory
regimes precisely because they solve international collective action problems and
enable regulation. These agreements tend to raise final product prices, limit
demand, and impose compliance costs on MNCs. As David Lake puts it, “the
private actors prospering in the interstices of political authority are not leading
the charge for supra-national entities designed to regulate their behavior more
However, this may not be true if regulatory regimes impose
asymmetrical costs across firms. Thus, in formulating their political strategies,
MNCs pay close attention not to regulation per se, but rather to the regulatory
costs they bear in relation to their market competitors. Moreover, they are likely
to consider carefully whether to undertake a political offensive individually or
collectively. Trade associations have emerged as key vehicles for such collective
political strategies, reducing the cost of political action. However, where asym-
metrical costs of regulation offer opportunities for unilateral advantage, compa-
nies are less likely to act in concert.
To elaborate, regulatory regimes carry significant implications for competi-
tiveness, as costs are imposed unevenly and new market opportunities could be
created. In the case of ozone depletion, the major US producers of ozone
depleting gases (CFCs) came to support an international agreement to reduce
production. Dupont, the world’s largest CFC producer, faced a stagnant domestic
market due to unilateral regulation in the US and saw the substance becoming
a low-margin commodity.
Dupont had invested heavily in substitute chemicals
prior to the treaty, anticipating that its dominant market position, extensive
distribution channels, and expertise in chemical engineering would lead the
company to gain a strong position in CFC substitutes. European producers, by
18. Rugman and Gestrin (1993).
19. Sell (2002).
20. Lake (1999) p. 46.
21. Parson (1993); Rothenberg and Maxwell (1997).
Multinational Corporations in Global Governance
contrast, opposed CFC controls because they enjoyed growing export markets,
lacked domestic controls, and lagged in the development of CFC substitutes.
Regulation can create barriers to entry in a number of ways; regulated
industries, such as hazardous waste, frequently have complex procedures for
certifying new processes, thereby stabilizing existing technologies and protecting
market incumbents.
Compliance activities also constitute a relatively fixed cost
that result in economies of scale favoring larger incumbents.
sometimes initiate private, voluntary mechanisms, such as the chemical indus-
try’s Responsible Care program, to raise public confidence, reduce the threat of
governmental regulation, and discipline poor performers who might attract
negative publicity and pressure for the whole industry.
Some companies could
gain relative advantage from regulations if they have lower compliance costs and
are better situated to innovate.
If companies have already adopted advanced
technologies, they may wish to shape regulations to broaden the market for them
or raise entry costs for rivals.
A good example is the German insistence that
the EU adopt some version of its “best available technology” clause for its
Eco-Audit and Management System, an environmental governance code. Be-
cause German laws require German firms to adopt best available technology,
German firms wanted their European competitors to face the same cost struc-
tures. Britain, on the other hand, generally adopts a more voluntaristic style of
environmental governance and avoids policies that force specific technologies on
its firms. Hence, British firms lobbied their government against agreeing to the
German proposal.
Regime authority structure
Regimes vary widely in the location of their monitoring, enforcement, and
sanctioning authorities. These can be situated at the domestic, regional, or
supranational levels, and rely on public or private mechanisms. It is frequently
assumed that MNCs seek to escape from the regulatory efforts of domestic
governments and social forces by establishing international governance struc-
tures beyond the reach of democratic accountability and pressures from labor
and other social groups, which are primarily organized on a domestic basis.
While MNCs have generally supported the establishment and expansion of
international market enabling regimes such as the WTO and the MAI, MNCs
have often fought to keep regulatory authority for environmental and social
issues at the national level. The preferences of NGOs are frequently the inverse
of MNCs; they tend to oppose the expansion of international market enabling
regimes, but support international-level governance for regulatory regimes such
as ozone depletion or labor rights.
22. Maloney and McCormick (1982).
23. Reinhardt (2000).
24. Garcia-Johnson (2000); Nash and Ehrenfeld (1997); Prakash (2000b).
25. Mitnick (1993).
26. Nehrt (1998).
27. Kollman and Prakash (2001).
28. Korten (1995).
David L. Levy & Aseem Prakash
Preferences of MNCs for regime structures depend on their perceptions of
their influence relative to NGOs and other protagonists in various fora. Levy and
Egan, in a study of the climate change negotiations, have argued that the
organizational, political, and discursive influence of US energy-related busi-
nesses was much greater domestically than in the international arena.
negotiations involved more than 140 countries, many of which were remote from
the influence of US companies. The international institutions guiding the
negotiations, particularly the scientific assessment bodies, had developed a
degree of autonomy and legitimacy that provided some insulation from the
interests of particular countries or industry sectors. Supranational organizations
seeking to extend environmental and social regulation are frequently perceived
to be more sympathetic to NGOs than to MNCs. In terms of principal-agent
theory, it is likely to be much harder for firms acting as principals to make
international organizations and foreign governments act as their agents.
It is
therefore not surprising that some companies fear the emergence of an inter-
national regulatory bureaucracy beyond the usual channels of influence. More-
over, if international economic integration does indeed weaken the autonomy
and sovereignty of nation states and erode NGOs’ access to decision-making at
the national level, then MNCs will find that their leverage will increase at the
national level. Even if internationalization is an incomplete and uneven process,
the ideology of globalization and competitiveness seems to exert a disciplining
effect on state managers and policy makers, producing the “competition state,”
whose primary goal is to be an attractive location for MNC activity.
Despite MNCs’ general antipathy toward international regulatory regimes,
specific competitive considerations can mitigate this outlook. While efforts to
coordinate social or environmental policies in international fora might sometimes
lead to a costly upward harmonization of regulatory standards, MNCs aspiring
to serve global markets often find a patchwork of national standards and
regulations to be even more expensive, in terms of product adaptation, loss of
economies of scale, and administrative expenses. Few MNCs pursue pure
multidomestic strategies, which respond to local differences in taste, culture, and
distribution channels, without also seeking some of the benefits of rationalization
across markets.
The desire for harmonization and economies of scale has
clearly been one of the key economic drivers for the development of the
governance structures of the EU,
though weaker sectors, such as the European
car industry, have sometimes sought national level regulations as a form of
Internationally harmonized regulations can also serve to preempt local stan-
dards that are, in some instances, extremely strict. For example, the US
automobile industry has been very keen to establish binding federal emission
standards that would impose a constraint on states, particularly California and
29. Levy and Egan (1998).
30. Keim and Baysinger (1993).
31. Carnoy, Castells and Cohen (1993).
32. Bartlett and Ghoshal (1989).
33. Pollack and Shaffer (2001).
34. McLaughlin, Jordan and Maloney (1993).
Multinational Corporations in Global Governance
Massachusetts. Harmonized standards, even if not representing a lowest common
denominator, are likely to be weaker than the level set by the most aggressive
local authority. The Codex Alimentarius, for instance, developed under the
auspices of the WTO, is an international set of safety standards for chemicals in
foodstuffs that has been widely criticized for its laxity and opaque process.
MNC preferences for regime structures can also depend on the cost of
engaging in negotiations in various arenas. The cost of international lobbying
and bargaining efforts is not trivial, particularly for smaller companies. In a
study by Getz of corporate political activity by companies involved in the ozone
depletion issue, she found that only the largest and most profitable U.S. firms
targeted international organizations.
Getz argued that most firms would prefer
to operate at the national level because that is where environmental laws are
implemented and enforced, and most firms lack the financial resources and
political sagacity to conduct international negotiations. Despite these concerns,
the international arena could offer companies economies of scale in their
political activities in two respects. First, MNCs might find that fewer resources
are needed to resolve an issue in a single international forum than to negotiate
the issue on a country-by-country basis. Second, an international forum offers
MNCs the opportunity to share the costs of political activity with firms based in
other countries. Indeed, Coen notes that while many companies have cut back on
their government affairs budgets during the latter 1990s, they have increasingly
turned to issue-specific international industry associations and alliances to share
the costs and increase their leverage.
Of course, cross-country institutional
variations in the organization of labor and capital will significantly influence the
propensities to use national-level associations as well as strategies employed to
influence policy processes.
Just as regimes can combine elements of market enabling and regulatory
features, they can also exhibit complex authority structures. In many cases, the
authority to monitor, enforce, and sanction are shared between domestic and
supranational arenas. For example, the WTO provides a dispute resolution
mechanism at the supranational level, but the decision on sanctions is taken at
the domestic level. In the beef hormone case, the WTO ruled in favor of the US
but the retaliatory tariffs imposed on EU products were decided solely by the US
Trade Representative. In the climate change regime, supranational institutions
conduct scientific assessments, negotiate country emission budgets, and establish
broad guidelines for emission trading mechanisms, but each country is respon-
sible for developing national mechanisms to control its emissions of greenhouse
Several authors have noted the rise of private sources of authority in
international governance. Haufler has observed that self-regulation is particularly
likely when companies face high risks of new government regulations, activist
pressures threaten their reputation, and high asset specificity constrains strategic
35. Getz (1993).
36. Coen (1999).
37. Hillman and Keim (1995).
38. Grubb and Vrolijk and Brack (1999).
David L. Levy & Aseem Prakash
Self-regulation is facilitated by high levels of information exchange,
learning, and consensus within the industry. Industry codes and standards, such
as the ISO 14000 environmental management standards, constitute private
regulatory regimes but also become incorporated into governmental regulatory
structures, creating complex hybrid forms.
In disputes over commercial con-
tracts, MNCs routinely require private arbitration as a condition of doing
—the recent dispute between Enron and the Government of Maharash-
tra, India, being a case in point. Importantly, in establishing some of these
private regimes such as the Forest Stewardship Council, NGOs have been key
A bargaining approach to understanding international governance
MNCs do not always succeed in securing the regimes they desire. This section
examines how outcomes of negotiations over regime formation among MNCs,
governments, and NGOs depend on the relative power of the actors and
idiosyncrasies of the bargaining process. In the obsolescing bargaining model of
the 1970s, MNCs wanted to maximize their share of financial gain, by keeping
taxes and royalties paid to the host country low, and by gaining access to
subsidies for capital investment and infrastructure development. In addition,
MNCs were seen as desiring a predictable and stable environment, and auton-
omy from “arbitrary” governmental interventions in areas such as currency
conversion, profit repatriation and local content requirements. These goals have
not disappeared in the new bargaining over international governance structures.
Indeed, the effort to establish the MAI and broaden the WTO to include services
(GATS), intellectual property rights (TRIPS), and trade-related aspects of
foreign investment (TRIMS), can be understood, at least in part, as an attempt
to incorporate some of these objectives into a new set of ground-rules for
MNC–host country bargaining. Rather than bargain with states deal-by-deal,
however, some of the new multilateral trade and investment regimes institution-
alize MNC positions by greatly reducing the ability of states to impose
performance requirements, discriminate between domestic and foreign investors,
or otherwise reduce the value of an investment. Building upon the obsolescing
bargaining model, we suggest that the complexity and dynamic nature of
bargaining processes, with multiple actors attempting to exert leverage through
various sources of power, leads to somewhat indeterminate outcomes.
The bargaining model of MNC–host country relations focused primarily on
bilateral regulatory regimes with domestic locus of authority. This model was
developed in the context of the polarized debate in the 1970s between those who
saw foreign direct investment (FDI) as a manifestation of the growing power of
multinational corporations and fundamentally antithetical to host country inter-
39. Haufler (2001).
40. Clapp (1998); Cutler, Haufler and Porter (1999); Prakash (2000a).
41. Mattli (2001).
42. Braithwaite and Drahos (2000).
Multinational Corporations in Global Governance
and those who argued that the power of MNCs had been exaggerated and
their economic benefits ignored.
The bargaining model represented a pragmatic
approach in which the benefits of FDI to the host country would be contingent
on the specific contractual arrangements of each deal. MNCs and host countries
would bargain over the distribution of benefits from each instance of FDI, and
the bargaining power of each side was determined by the possession of rare or
unique assets.
MNCs, for example, might offer certain technological and
marketing capabilities, while host countries could control access to natural
resources and local markets.
Over a period of time, the shifting balance of
power between the MNC and the host country would tend to make the original
bargain obsolete, leading to some renegotiation of terms.
In the three decades since Vernon laid the groundwork for the bargaining
model, evolving global political and economic conditions require its revision. As
Vernon himself later recognized, conflict over the potential value of FDI to host
countries has by and large disappeared.
Whether through conviction or co-
ercion, developing countries have increasingly opened their economies to trade
and inward investment.
In part, this trend reflects the broader ideological shift
towards open markets and deregulation. As tools of governance, market-enabling
regimes had become as important as regulatory regimes. During the 1980s,
scholars shifted their attention from concerns about MNC power toward the
efficiency gains available in the internalized structure of the MNC.
and political challenges to the role of MNCs waned as the institutional bases for
such perspectives weakened. In the new atmosphere, collaborative dimensions of
state–MNC relations have received more attention than conflict.
In the 1990s, however, the increased visibility of NGOs opposing unfettered
globalization has renewed debates over the power of MNCs vis-a`-vis other
actors. NGOs have successfully added non-economic issues such as environmen-
tal standards to bargaining agendas that traditionally have focused on MNC–state
distributional concerns. Thus, dyadic bargaining between states and MNCs has
developed into multiparty bargaining among NGOs, governments and firms. A
confluence of issues, from genetically modified organisms to sweatshops, has
mobilized a new generation of activists and generated pressure for new modes
of international governance that accord a more significant role to civil society.
Governments and MNCs have increasingly granted NGOs a seat at the negotiat-
ing table, and consequently the strategies and tactics of NGOs influence the
bargaining process over governance structures and processes.
43. Barnet and Muller (1974); Evans (1979).
44. Gilpin (1975); Johnson (1970).
45. Vernon (1971).
46. Fagre and Wells (1982); Kobrin (1987).
47. Moran (1985).
48. Vernon and Spar (1990).
49. Dunning (1993); Strange (1993).
50. Dunning (1988); Hennart (1982).
51. Murtha and Lenway (1994).
52. O’Brien et al. (2000), Prakash and Kollman (2004).
53. Newell (2001), but see Clark et al. (1998).
David L. Levy & Aseem Prakash
The revised bargaining model presented here reflects the emergence of a new,
broader, terrain of contestation, one that relates to the very structures and
processes of international governance. It seeks to examine both regulatory and
market-enabling regimes. Eden has discussed the multifaceted nature of global-
ization and has identified three components in particular: the convergence of
production, financial, and technological structures, the synchronization of na-
tional economies, and the interpenetration of flows of trade, investment, and
Concurrent with this economic globalization, though less noted in
the literature, is the growth of governance structures at regional and international
levels that provide an institutional context of rules and norms for the global
economy. Just as MNCs have been major agents of economic interdependence,
they are interested and important actors in constructing the edifice of the new
global polity. In doing so, they negotiate and bargain with a range of other
actors, including home and host governments, NGOs, and existing international
and supra-national organizations.
Despite the effort within regime theory to focus attention on the institutions
of governance rather than governments, regime theory has been much criticized
for its state-centered perspective,
and for its functionalist emphasis on reducing
transaction costs and solving collective action problems.
Only recently have
scholars begun to take non-state actors more seriously as important agents in the
processes of international governance.
Peter Haas has pointed to the import-
ance of “epistemic communities” of scientists as key agents in shaping environ-
mental regimes,
while some have looked more broadly to the role of global
civil society and business.
If regime theory has been too state-centered, then the neo-Gramscian histori-
cal materialist perspective in IR has placed too much emphasis on the power of
capital in the global polity.
In the process of forging a transnational hegemonic
bloc dominated by MNCs, in alliance with internationally oriented state and
NGO elites, national states are viewed as passively adapting to accommodate the
demands of the new global economy. Robinson argues that national states are
converted “into transmission belts and filtering devices for the imposition of the
transnational agenda.”
Although Gramsci’s concept of hegemony represents a
negotiated consensus reflecting a historically specific balance of social forces,
the rendition in the IR literature tends to be a top-down account in which
national and global governance structures are determined by the economic needs
of MNCs.
54. Eden (1993).
55. Litfin (1994); Strange (1993).
56. Keohane (1983); Young (1989).
57. Higgott, Underhill and Bieler (1999).
58. Haas (1992).
59. Cutler, Haufler and Porter (1999); Lipschutz (1992); Wapner (1995).
60. Cox (1987); van der Pijl (1984).
61. Robinson (1996) p. 19.
Multinational Corporations in Global Governance
Characteristics of the bargaining terrain
We outline here the key characteristics of the new bargaining terrain underlying
the processes of regime formation. In doing so, we suggest a theoretical path that
avoids the state-centrism of regime theory and the deterministic materialism of
the neo-Gramscian approach, while building on insights from these two perspec-
tives. It offers a bottom-up “micro–macro” approach
in which regimes are the
negotiated outcome of bargaining amongst MNCs, states, NGOs, and other
actors. We draw on regime theory to view global governance as the development
of norms, cognitive frames, as well as organizational infrastructure. We also note
that regime characteristics vary on two critical dimensions: regime purpose and
location of authority. Thus, not all regimes are mechanisms for equitable
solutions to collective action problems.
The neo-Gramscian perspective places regime formation in the broader
context of political contests between different groups of social actors in the
global polity. Regime structures and processes therefore reflect the varying
power, resources, and strategies of the various actors in these contests. Despite
the substantial material resources possessed by MNCs, other actors also have
considerable influence over regime-building processes, on account of their
organizational capabilities and ability to resonate with particular ideological and
cultural discourses. Moreover, as discussed subsequently, MNCs from different
sectors and with different competitive positions rarely speak in one voice on
issues of supranational governance, thereby creating political space for other
societal actors to exploit these differences and push their agendas. The outcomes
of these negotiations among host and home governments, business, and civil
society, over a series of specific issue arenas, are constitutive of the emerging
international system of governance, accounting for its untidy and uneven form.
In addition to examining both regulatory and market enabling regimes, our
approach differs from the traditional bargaining model in three respects: the
bargaining process involves multiple actors, these actors can draw upon multiple
bases of power, and the bargaining process is dynamic, extended over time, and
somewhat indeterminate.
Multi-actor bargaining
In the traditional bargaining model, negotiations were typically bilateral, be-
tween the MNC and the host government. Further, the old bargaining framework
presumed the state to be a unitary actor negotiating as a single entity with a
given set of interests. In our revised approach, bargaining is a multi-actor
process among NGOs, states, firms, and international organizations. Indeed, even
states may be represented by multiple authorities, such as departments of
environment and state, with conflicting interests. Organizations representing
labor, environmentalists, scientists and other elements of civil society have been
particularly active in negotiations over environmental regimes, such as those for
62. Braithwaite and Drahos (2000).
David L. Levy & Aseem Prakash
climate change,
ozone depletion,
and biodiversity,
as well as for private
codes of conduct regarding MNCs in developing countries. Even when not
seated directly at the negotiating table, activist groups have exerted considerable
influence through street demonstrations and through the dissemination of infor-
mation; some have attributed the derailing of the MAI to the strategic use of the
Internet by activist NGOs.
Even the original Bretton Woods institutions, the
World Bank and the International Monetary Fund, which were established
through negotiations among a small number of states, have gradually been
opening themselves to non-state influences.
The implication of a multi-actor bargaining perspective is that governments
and firms are now subjected to several influences, often exercised through
traditional as well as non-traditional channels. Thus, firms and governments
exercise less control over the bargaining process, and bargain outcomes are more
uncertain. A broader range of goals is up for negotiation, and a more diverse set
of norms and values are likely to be introduced. The result is a greater space for
potential conflict, yet simultaneously more opportunities for opportunistic coali-
tions. One of the implications then is that it is difficult to find “pure” regime
types: to satisfy diverse constituencies most regimes have both regulatory and
market-enabling features. For example, to get sufficient support in the Congress
for NAFTA, a market-enabling regime, President Clinton had to agree to
incorporate certain regulatory features to win support from the environmental-
Relative power
In the traditional bargaining model, power was derived from the possession of
unique assets, market access, and technologies. Indeed, the possession of
firm-specific advantages provides the raison d’etre for MNCs to exist.
larly, a country’s power derives from its ability to offer access to large markets
or valuable mineral resources. In the revised bargaining perspective, economic
power is but one of several sources of leverage. Also, the power of MNCs now
needs to be assessed relative to NGOs as well as host governments.
The power to frame debates within particular discursive and cultural contexts
has increasingly been recognized as a key factor in the course of international
Negotiations over environmental regulatory regimes, for example,
often revolve around contested claims concerning science.
Industry has gener-
ally advocated for a “sound science” approach that requires a high burden of
proof before regulatory action is taken, while environmental NGOs and some
63. Newell (2000).
64. Litfin (1994).
65. Levidow (1999).
66. Kobrin (1998).
67. Scholte (2000).
68. Dunning (1988).
69. Haas (1996); Litfin (1994).
70. Jasanoff (1990).
Multinational Corporations in Global Governance
European governments have urged adoption of the “precautionary principle.”
Keohane and Nye have used the term “soft power” to describe:
[…] the ability to get desired outcomes because others want what
you want. It is the ability to achieve goals through attraction
rather than coercion. It works by convincing others to follow or
getting them to agree to norms and institutions that produce the
desired behavior. Soft power can rest on the appeal of one’s ideas
or culture or the ability to set the agenda through standards and
institutions that shape the preferences of others.
The Gramscian concept of hegemony similarly rests on a form of “soft power”
that generates legitimacy and consent by projecting intellectual and moral
leadership and a sense of common interests. A key implication of the discursive
aspect of power is that actors’ interests and preferences are not fixed by
structural circumstances, but can be shifted by framing issues in particular ways.
Thus, firms can establish new alliances not merely through traditional means of
offering material incentives but also by providing information and new framings
for issues.
Organizational structures and capacity also serve as a critical resource in the
exercise of power. Murtha and Lenway have discussed how governments can
deploy their organizational capabilities and political institutional structures in a
strategic manner to influence MNC investment behavior.
NGOs are frequently
able to compensate for their lack of material resources by coordinating their
lobbying and information dissemination and by appealing to moral principles.
Indeed, many scholars have argued that an embryonic global civil society, which
is somewhat autonomous from the state-centric system, is starting to emerge.
MNCs most commonly coordinate their input into international negotiations
through various sector-specific industry associations, but also form transnational
issue-specific groups around significant issues.
Despite diverging perspectives
on regulatory issues among MNCs from different sectors and countries, organi-
zations such as the International Chamber of Commerce and the Trans-Atlantic
Business Dialogue have been establishing working groups on specific issues to
improve the level of international and cross-sector coordination as well as to fill
in the “expertise gap.” Such issue specific and/or industry specific coalitions are
important in strengthening MNCs bargaining power in relation to governments.
The emergence of several new bases of power implies that the outcomes of the
bargaining process is now critically influenced by bargaining strategies, es-
pecially regarding how actors are able to project their perspective in the media.
This requires MNCs to develop local as well as global political competencies, as
they are trying to fend off challenges at multiple levels. Again, such indetermi-
nacies and multiple bases of power lead to regimes that do not correspond to
ideal types, but rather incorporate both regulatory and market-enabling features.
71. Keohane and Nye (1998) p. 86.
72. Murtha and Lenway (1994).
73. Florini (2000); Lipschutz (1992); Rosenau (1992).
74. Coen (1999).
David L. Levy & Aseem Prakash
Bargaining process dynamics
The traditional bargaining framework suggested that relative power between the
MNC and the host country might shift over time, leading to pressure for
renegotiations. Most bargaining theory proponents argued that MNCs lost the
key bargaining chip of capital mobility once an investment was made, and that
host governments gained power over time as local personnel gained technical
expertise and managerial capabilities.
Critics of this view claimed that contin-
ued innovation by MNCs, control of export markets, multi-lateral financing
arrangements, alliances with host country elites, and the dependence of host
countries on private sources for future investments, would constrain and even
diminish host country autonomy and power.
Thus the bargaining framework
did embody a dynamic element that considered shifts in power and the pressure
to revise agreements. Nevertheless, each bargain was a discrete event occurring
at a specific point in time; if shifts in power and outcomes were analyzed for two
bargaining events, this was an exercise in comparative statics, and linkages
across separate bargaining domains were rarely examined.
In the revised perspective, we view bargaining as an ongoing path-dependent
process, sometimes extended over many years. This is particularly apt for
bargaining over institutions of governance. Clearly, market-enabling regimes
such as the WTO and regulatory regimes such as that for climate change have
evolved over many rounds of negotiation, each of which built on the norms,
rules, institutions, and collective experience developed during previous rounds.
Linkages also exist across regimes. For example, the institutional arrangements
for providing scientific assessments to the ozone negotiations became the
reference point for the climate regime. More broadly, the market-based norms of
dominant regimes such as the WTO have informed the premises of regulatory
regimes. Moreover, it is apparent that the process of negotiation itself exposes
companies to new institutional settings and viewpoints, which have the potential
to shift corporate perceptions of their interests. For example, during the climate
regime negotiations, MNCs such as BP and Volkswagen shifted their positions
from opposition toward support, as they developed the view that environmental
and business goals can be compatible.
In the traditional FDI bargaining framework, the relative power of each side
determined the division of surplus from the investment between the parties.
our perspective, the complex and dynamic nature of negotiations combined with
strategic behavior by actors makes the outcome somewhat indeterminate, and the
most obviously powerful actor does not always win.
Outcomes are thus a
function of the specific processes and context of each regime. Oran Young
argues that “institutional bargaining almost always involves a major element of
75. Moran (1985).
76. Evans (1979); Gereffi (1985).
77. Levy and Rothenberg (2002).
78. Moon and Lado (2000).
79. This would appear to make it difficult to test our bargaining model empirically. One approach might be to
propose that the complexity of negotiations, in terms of number of parties and issue linkages, reduces the
importance of material resources in determining outcomes.
Multinational Corporations in Global Governance
integrative bargaining in contrast to distributive bargaining.”
In other words,
regime formation is not a zero-sum game, and, as a result, the control of
economic and material resources is less important in determining the outcome.
Rather, negotiations require a great deal of strategic positioning and bargaining
skill, in which actors with less power in the traditional sense of material
resources can sometimes outmaneuver their rivals.
This paper outlines an approach for understanding the role of MNCs in
international governance that is based on a typology of regime types that is
useful for analyzing MNC preferences, and that builds on the bargaining model
of foreign direct investment (FDI). In our characterization, regimes vary in two
key dimensions, the goal of the regime, which can be market enabling or
regulatory, and the location of authority. However, such ideal types seldom exist
and most regimes incorporate both market enabling and regulatory features to
satisfy diverse constituencies. In general, MNCs tend to support the creation of
market enabling regimes at the international level, and, if they are under pressure
to accede to social or environmental regulation, prefer that the locus of authority
be national and private. However, there are many instances where these general-
izations do not hold, and MNCs assess their preferences in light of their relative
influence in various arenas, the costs of political participation, and competitive
considerations specific to each regime and industry.
Just as in the original bargaining model, MNCs in international governance
are neither omnipotent ogres nor gentle giants pursuing the common interest;
rather, they bargain with states, NGOs, and other actors over the form and
structure of particular international agreements and regimes. We argue that the
emergent institutions of global governance represent the outcome of a series of
negotiations; the preferences and power of MNCs vary across issues and sectors,
and from one negotiating forum to another, which accounts for the uneven and
fragmented nature of the resulting system. Our conceptualization of bargaining
over governance structures differs from the traditional framework in that it
recognizes the multi-party nature of negotiations, multiple sources of power, and
the complexity and dynamic nature of the bargaining process. The resultant
indeterminacy of outcomes suggests that while MNCs are powerful actors, they
do not always succeed in imposing their preferred regime type. Moreover,
regimes are shaped by the particular strategies of MNCs operating in specific
industry and competitive contexts, leading to idiosyncratic outcomes that are at
variance with predictions based on simple hypotheses such as the decline of the
regulatory state or the race-to-the-bottom.
We have chosen to focus on the preferences and power of MNCs. Future
research could build upon this approach to examine the positions of states,
international institutions and non-state actors. Overall, it may well be possible to
discern a trend toward private sources of authority and an increase in the power
of MNCs relative to states and NGOs, but an endpoint “when corporations rule
80. Young (1994) p. 127.
David L. Levy & Aseem Prakash
the world”
is highly unlikely. NGOs and states are also building their
capacities to coordinate their activities and act effectively in international arenas,
ensuring that continued contestation would be the one reliable feature of
international governance structures.
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... In contrast to de jure constraints, de facto constraints are precipitated through foreign contributors' activities. Recent literature on global governance has seen a growing emphasis on the prominence of international market actors as the apparatus for enforcing institutional rules and commitments (Levy and Prakash, 2003;Kono, 2007). ...
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An important field of the political economy literature examines the mechanism of property rights commitments in authoritarian regimes where formal political constraints are absent. While many of the existing studies focus on how domestic autocratic institutions shape the formation of property rights regimes, this paper takes an open-economy approach and examines the compound effect of global economic integration and intergovernmental organizations (IGOs) on property rights protection in authoritarian regimes. We propose that the domestic presence of foreign factors of production is positively associated with more credible property rights commitments in authoritarian economies. Moreover, this association is moderated by authoritarian regimes' participation in institutionalized IGOs, which enhance the organizational capacity of these foreign owners of production factors. Through the transnational networks of production integration, international institutions indirectly alter the domestic distribution of bargaining power between the authoritarian government and private economic actors, rendering the commitment to property rights protection more credible. An analysis of a panel dataset consisting of 105 authoritarian regimes yields preliminary evidence supporting our proposition.
... There are many ways to characterize global institutional governance regimes (Amann et al., 2007;Braithwaite & Drahos, 2000;Djelic & Sahlin-Andersson, 2006;Levy & Newell, 2006;Levy & Prakash, 2003;Steger, 2003;Windsor, 2007), but we choose to focus on two dimensions identified by Levy & Newell (2006) and many others. First, "some governance regimes…are truly global" while others are "regional in scope." ...
Scholars of international relations and international political economy have long documented international business diplomacy (IBD) as a practice of multinational enterprises (MNEs), although the specific practices involved have not been consistently established in international business scholarship. We apply "practice theory" to position IBD within the realm of MNEs’ global non-market strategy (NMS), arguing that IBD constitutes a set of practices in the implementation of global NMS, and that the most appropriate practices depend upon two key dimensions of the global institutional governance regime faced by the MNEs: the governance level and the degree of rule formality.
... Politiikan tekoa sen sijaan ovat ohjanneet valtavirtaa edustavat taloustieteilijät (Ehrlich 1989). Tämän lisäksi ylikansallisten yhtiöiden poliittinen vaikutusvalta on kasvanut mittasuhteisiin, joissa ne voivat vaikuttaa kansainvälisiin instituutioihin -ympäristön näkökulmasta tarkastellen useimmiten rampauttavasti (Levy ja Prakash 2003;Vatn 2007;Wittneben ym. 2012). ...
Tässä artikkelissa tarkastelemme talouskasvun ja kestävän kehityksen periaatteiden ristiriitaisen suhteen muodostumista käsitteellisellä tasolla. Tarkastelemme erityisesti sitä, miten periaatteiden konkreettinen yhteensovittamattomuus päätöksentekoa ja toimintaa ohjaavassa uusliberaalissa kansainvälisessä järjestyksessä tekee kestävään kehitykseen määritelmällisesti kuuluvan sukupolvien välisen tasa-arvon mahdottomaksi. Aloitamme tarkastelun kestävän kehityksen politiikan synnystä 1950-luvun puolivälistä alkaen ja sitä seuranneista kansainvälisistä politiikkatoimista, jotka ovat eri aikoina tähdänneet kestävän kehityksen tavoitteeseen eri keinoin. Tuomme esiin, että kansallinen itsemääräämisoikeus ja vapaaehtoisuus ovat säilyneet keskeisinä johdattavina ajatuksina näiden politiikkatoimien muotoutumisessa. Esitämme, että aidosti ympäristöllisesti kestäville politiikkavalinnoille ei ole nykyisessä järjestyksessä esimerkiksi tieteellisiä, talousrationaliteettiin tai lainsäädännön rakenteisiin perustuvia esteitä, vaan esteet ammentavat ideologisesta uskosta talouden ensisijaisuuteen yhteiskunnallisesti merkittävissä päätöksissä
... In terms of the ethical havens argument, it is possible for this contestation and divergence to create space for a larger array of production sites to be incorporated into the ethical market, whether in terms of country of origin or specific types of ethical criteria (environmental versus social criteria, for instance). On the other hand, another reason for disarticulations (or lack of integration) is that market-enabling imperatives may overtake regulatory ones (Hamilton, 2011: 712; see also Levy and Prakash, 2003). Bidwell et al. (2018) refer to this process as "recommodification," illustrating that cost is the king even in ethical markets, and particularly for mainstreaming ethical markets. ...
Who benefits from ethical product markets? While most ethical products (e.g. fair trade and eco-certified products) are intended to benefit marginalized communities and vulnerable ecosystems, the reality is that the geographic preferences exhibited by so-called ethical markets may, in fact, reinforce global inequities rather than remedy them. It can be difficult to evaluate the outcomes of ethical product markets, however, because we are often limited to data from a small number of industries with widely used standards and certifications. This research pilots a new methodology, using an online archive—the Wayback Machine, to evaluate shifts in countries' ethical market share, focusing on the evolution of the ethical diamond market over the past 20 years. The ethical diamond market is an interesting case because it began specifically as a competition among countries of origin, with Canadian officials and diamond producers trading on Canada's reputation to position Canada as an ethical product haven in opposition to conflict diamonds from Africa. Yet, Canada's early ethical monopoly has been contested on multiple fronts, and this article focuses on the following questions: To what extent has the contestation over Canada's ethical monopoly actually changed the ethical diamond market? Specifically, how much market share have different ethical alternatives gained and lost over time? And, what does this tell us about the governance and development outcomes of the market? The results show that while the market has diversified over time, it is still largely not benefiting the most marginalized diamond producing countries and communities.
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This paper examines the role of global governance in international trade, with a focus on the case study of Bangladesh. The aim of the research is to investigate the importance of trade policy in shaping the future growth of international trade, evaluate the role of global governance in international trade, and analyse data to recommend a comprehensive trade policy for the promotion of international trade in Bangladesh. The research questions explore the possible factors hindering the development of international trade in Bangladesh, the contribution of global governance in overcoming these barriers, and the effectiveness of Bangladesh's current trade policy in promoting international trade. The study argues that global governance is essential for ensuring fair and equitable international trade, and a sustained global governance approach is necessary to prevent the fragmentation of international trade into a regional and potentially discriminatory and protectionist bloc. The research recommends a comprehensive trade policy for Bangladesh to promote international trade and sustainable economic growth.
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This working paper brings together a diverse group of scholars to discuss the historiography of capitalism, business history and global governance and lay the foundations for further research in this area. Grace Ballor and Sabine Pitteloud open the discussion with a historiographical survey of the ways capitalism and its actors – in particular entrepreneurs and managers, firms and business associations – have interacted with international organizations and global governance frameworks. This literature review lays the foundation for contributions from four leading scholars and their perspectives on the past, present, and future of research in this area. Patricia Clavin discusses capitalism and governance through the dynamics of international relations, while Nicolás Perrone brings a lawyer’s perspective to the public-private creation of international rules; Neil Rollings thinks about firms, governments, and global governance through both continuities and change, and Quinn Slobodian applies the analytical framework of international political economy to the evolving relationships between states and markets on a global scale. Our collective examination of business and international order aims to offer critical scholarly insight on the 20th and 21st centuries and outline future research agendas for what promises to be an increasingly rich field of study.
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Since 2008, foreign land acquisitions have attracted international attention under the term »land grabbing.« Illustrated by rich and nuanced empirical accounts of forty Chinese and British investment projects in Sub-Saharan Africa, Ariane Goetz explains the phenomenon of »land grabbing« from the perspective of two investor countries. She reflects on Chinese and British public policy, state-society relations, national developmental contexts, ideologies, and international relations and thereby gives insights into the political economies that enable these investments as well as the development ambitions and institutionalized paradigms of which they form a part.
Multinational firms operate in multiple national jurisdictions, making them difficult for any one government to regulate. For this reason the firms themselves are often in charge of their own regulation, increasingly in conjunction with international organizations by way of public-private governance initiatives. Prior research has claimed that such initiatives are too weak to meaningfully change firms’ behavior. Can public-private governance initiatives help firms self-regulate, even if they lack strong monitoring or enforcement mechanisms? I take two steps toward answering this question. First, I introduce a new measure of firms’ performance on ESG (environmental, social, and governance) issues: the extent to which the firms issue public responses to claims of misconduct from civil society actors. Second, I argue that public-private governance initiatives allow firms to benefit from the legitimacy of their public partners, lowering the reputational cost of transparent response. Employing novel data on firm responses to human rights allegations from the Business and Human Rights Resource Center, I find that membership in the largest and most prominent initiative, the United Nations Global Compact, significantly increases firms’ propensity to respond transparently to stakeholder allegations. These results suggest a limited but important role for public-private initiatives in global governance.
The automobile industry (defined here as autos and auto parts) is of enormous importance to the economies of Canada, the United States, and Mexico. In each of these countries it employs a significant number of people directly and, through its linkages with suppliers and buyers, another large percentage indirectly. The economic viability of the auto industry has a direct impact on the overall health of each of the three North American economies. Predicted substantial excess capacity and large numbers of plant closures over the next ten years threaten this economic health.
Adopting new and much more comprehensive concepts of both power and politics, the author develops a theoretical framework to show who really governs the world economy. He goes on to explore some of the non-state authorities, from mafias to the 'Big Six' accounting firms and international bureaucrats, whose power over who gets what in the world encroaches on that of national governments. The book is a signpost, pointing to some promising new directions for the future development of research and teaching in international political economy.