International Business and Government Relations in the 21st Century
Robert Grosse, (ed), Cambridge University Press, 2005, 327 pages, £30.00.
In the Introduction to this volume Robert Grosse informs the reader of its goals: to highlight the main aspects of government-international business relations in the early 21st century and help policymakers and company managers to improve their ability to make decisions. The book, indeed, meets both goals; it offers some practical advice to practitioners and provides an excellent survey of the literature on ‘institutional theory’.
The book embraces the multidisciplinary approach as a critical tool in the analysis of government-firm relations, and draws from ‘institutional theory’ and its contributions from many disciplines, notably political science, sociology, anthropology and economics. Each discipline provides a distinct perspective on relations between firms and national governments. For instance, drawing from sociology the institutional theory emphasises the behaviour of the firm as mirroring societal norms and therefore the limits of rational maximising behaviour in the light of pressures from other institutional participants. Similarly, the contribution from political science is critical to identify the hierarchy of relationships from governments to companies to individuals. Considerations for government-business relations are relatively new to the debate on multinational firms. No later than a quarter of a century ago international business authors such as Alan Rugman, and David Teece paid little attention to it in their seminal work on transaction costs.
The strength of the volume, therefore, is to offer a variety of conceptual perspectives and a truly interdisciplinary analysis. The book addresses issues such as the question of legitimacy of the international firms from the perspective of host societies. Are firms able to achieve sufficient acceptance by governments so that they can pursue their corporate goals in harmony with societal goals? This leads to considering aspects of corporate governance “which includes both the pattern of enterprise ownership (including state ownership) and the way in which ownership, regulation, and other bases of control are utilized to legitimate the corporation as an institution and direct/restrict its activities” (p 9). Even if his conclusions are disputable, we find interesting Lee E Preston’s review of a number of analyses of corporate governance.
The volume – and, in particular, John Stopford’s chapter – interestingly acknowledges the existence of three new sets of ‘balance of power’ – between States, between markets and States, and between individuals and States – as well as broad webs of stakeholders – the firms with strategic alliance partners, the governments in regional blocs, sub-national jurisdictions, pressure groups, NGOs, etc. These inevitably affect decision-making by both national governments and multinational companies. Similarly the relationship of host countries and multinationals is critically affected by changes in political conditions, technology and competitive conditions.
After discussing Raymond Vernon’s bargaining theory and suggesting a ‘political-bargaining model’, the book concludes by presenting both home and host perspectives on governments and multinational firms in emerging markets. All contributions to the volume offer an interesting and comprehensive, yet not conclusive, view of international business and government relations in the 21st century. Perhaps they are not all worth thorough reading. To the busy reader we suggest to begin with Yadong Luo’s ‘Shifts of Chinese government policies on inbound foreign direct investment’ and Stephen J Kobrin’s ‘Multinational enterprise, public authority, and public responsibility: the case of Talisman Energy and human rights in Sudan’.
Paola Subacchi
International Economics Programme, Chatham House