International business–government relations research 1945–2015: Concepts, typologies, theories and methodologies

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International business–government relations research 1945–2015: Concepts, typologies, theories and methodologies Jean J. Boddewyn Emeritus Professor of International Business, Baruch College, City University of New York, USA

A R T I C L E I N F O

A B S T R A C T

Keywords: Concepts Typologies Theories Methodologies Confrontation Accommodation Competition Future prospects

Seventy years after its postwar inception, the field of international business–government relations (IBGR) is rich in new concepts, typologies, theories and methodologies that have broadly reflected the three post-WWII periods of Confrontation, Accommodation and Competition. This analysis discusses the correspondence between these ‘‘new terms’’ and IBGR practice during each one of these periods which have continuously brought up new actors, issues and ideologies whose study keeps growing in quantity if not always in quality. It concludes with what can be anticipated regarding the international relations between business and governments in a future marked by much greater political disorder and less economic multilateralism as well as by nonmarket strategies that may remain localized. ß 2015 Elsevier Inc. All rights reserved.

1. Introduction Seventy years have passed since an old but renamed business species – the multinational enterprise (MNE) – faced post-WWII sovereign states (Wilkins, 1974). According to Fayerweather (1973) and Grosse (2005, p. 10), there ensued at first a period of confrontation after 1945 between these two institutions because foreign direct investors were growing in number, size and importance in both primary-resources extraction and manufacturing while postwar governments could not make sense of this advent. This span was then succeeded by a period of accommodation when governments came to understand that foreign direct investments (FDI) brought novel technologies as well as jobs and export revenues to host countries. It is more difficult to categorize the current relations between governments and MNEs. However, I will argue that they have been significantly marked by new and growing competitions from non-governmental organizations (NGOs), emerging-market MNEs and the huge ‘‘developmental state’’ of China. Meanwhile, each one of these three periods has witnessed new terms in the forms of concepts, typologies, theories and methodologies that have reflected emerging issues between MNEs and governments as well as shaped their resolution. Therefore, this article purports to justify the categorization of these three periods as confrontational, accommodating and competitive, and to show how these new terms have reflected the key developments in

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international business–government relations (IBGR) from 1945 to 2015. During these 70 years, governments have confronted economic entities whose ultimate ownership and control often did lie beyond their borders, while MNEs have faced a growing number of jurisdictions rooted in different political systems and ideologies (Jones, 2005, p. 201). The concepts, typologies, theories and methodologies discussed here are mainly those that have come to my mind as I developed the three main themes of confrontation, accommodation and competition, plus those suggested by my ongoing readings, but I did no systematic search for them. Similarly, my labeling some of these entries as ‘‘most influential’’ has been mostly a matter of personal choice based on what I learned through my own post1964 research.

2. The first era of confrontational relations: 1945–1979 Moran (2009) has pointed out that the immediate post-WWII period witnessed a strange and large beast – the MNE – together with the foreign direct investment it generated. Its impact had significantly grown after the war but international economists, business executives and government officials could not quite make sense of the postwar MNE even though such firms as Esso, Shell, Singer, Ford, Siemens and I.G. Farben had been abroad for decades already. They asked: what did the MNE do? How did it function? Who owned and controlled it? Was it good or bad for host countries during the ‘‘economic reconstruction and development’’ of the immediate postwar world?

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2.1. Emerging confrontation Particularly perplexed were the governments of the numerous new nation-states that emerged from former colonies, starting with India in 1947. For a variety of reasons including an anticolonialist reaction against the economic and political ideologies and practices of their former European masters and of the dominant United States, these new countries favored autarky, government ownership and control of key industries as well as import substitution – all policies also promoted by the powerful Soviet Union. For that matter, many developed countries were flirting with ‘‘economic planning’’ in the new Keynesian post-war environment and were also threatening MNEs with regulation. Many states felt that their sovereignty was being challenged by the fast growing and spreading MNEs or was even ‘‘at bay’’ – a situation defined as of ‘‘a hunted creature compelled to turn on its pursuers’’ (Webster’s Dictionary). Government responses came fast and furious, leaving no doubts about the confrontational nature of this period. Thus, in the early 1970s, U.S. business had to mobilize against the widely supported but ultimately defeated Hartke-Burke bill that would have frozen imports, limited technology exports and increased taxes on overseas earnings. Then, a series of widely publicized international bribery and political scandals in the mid-1970s (e.g., with ITT in Chile) tarnished the image of U.S. MNEs which were labeled as stateless entities able to shift profits from high-tax jurisdictions to low ones, as plunderers of developing countries’ natural resources and as enablers of easily bribed authoritarian ruling elites (e.g., Bucheli & Salvaj, 2013). The 1977 U.S. Foreign Corrupt Practices Act ensued from these complaints, and it was followed by anti-boycott laws and pressures in the developed world to divest from apartheid-era South Africa. Besides, U.S. antitrust laws were applied to international-business firms so that prewar cartels largely disappeared and certain types of joint ventures were abandoned (Wilkins, 1974, p. 299). Later on, controls over the acquisition of U.S. firms by foreign ones were imposed on account of the perceived ‘‘Japan Threat’’ of buying many foreign assets in the 1980s. These early decades also witnessed strong calls for a ‘‘New International Economic Order’’ through United Nations (U.N.) codes of conduct (see below). Meanwhile, foreign investors often faced full or ‘‘creeping’’ expropriation, political instability, labor resistance, dollar shortages, restraints on trade and payments, investment controls, laws excluding or reducing their ownership, and foreign-government interventions in their business. Inward FDI proposals frequently had to be screened to check whether they had a favorable impact on the balance of payments, brought in modern technology and were located in areas of high unemployment. Yet, these deterrents did not prevent FDI growth in Western Europe and Japan which were recovering from the war’s damages as well as in Australia and other countries where oil and other crucial raw materials (e.g., copper) were to be found (Wilkins, 1974, p. 314–315). Treaties of Friendship, Commerce and Navigation were signed by the U.S. government with both developed and less-developed countries, which provided guarantees against all lawful losses due to war, insurrection, expropriation and currency inconvertibility. These treaties also required just and prompt compensation by foreign governments when expropriating U.S. investments (Wilkins, 1974, p. 332–333). Still, U.S. and other multinationals had to bow to the power of national sovereigns when the latter chose to exercise it – a problem made worse when the managers of MNE subsidiaries lacked experience in government relations upon their appointment abroad (Encarnation & Vachani, 1995). Older developing countries in Latin America where FDI had long existed did espouse the dependencia philosophy of economist Prebisch (1968) who promoted import substitution while

government requirements were fairly drastic in India where the forbidding of majority ownership by foreigners and the mandatory reduction of foreign holdings over a specified period of time were common constraints. However, exemptions could be obtained if the foreign MNE exported a lot, spent much on R&D locally, saved on foreign exchange and brought in high technology (Encarnation & Vachani, 1995). Canada, France, South Korea and Mexico imposed similar restraints on inward FDI on account of ‘‘The American challenge’’ popularized by Servan-Schreiber (1968). Worldwide, the number of FDI expropriations rose rapidly in the 1970s – particularly, in large-scale mining and oil extraction (Jones, 2005, p. 213). Two permanent regulatory issues surfaced during this first period: what rules should govern the behavior of MNEs in host countries, and how should these firms be treated by host governments? In response, besides the 1961 Code of Liberalization of Capital Movements agreed upon by developed countries, three specific instruments were successfully negotiated: (1) the tripartite [governments, firms and unions] Declaration of Principles Concerning Multinational Enterprises and Social Policy, agreed upon through the International Labor Organization; (2) the Declaration of International Investment and Multinational Enterprises, made in the Organization for Economic Co-operation and Development, and (3) the Set of Multinationally Agreed Equitable Principles and Rules for the Control of Restrictive Business Practices, generated in the U.N. Conference on Trade and Development (Sauvant, 2015a). There were also restrictive codes of conduct on breast-milk substitutes, consumer protection, technology transfer and illicit payments but the International Center for the Settlement of Investment Disputes (ICSID) offered arbitration, starting in 1966 (Sauvant, 2015a). All of these agreements were voluntary rather than obligatory as far as MNEs were concerned. Meanwhile, a mandatory multilateral United Nations Code of Conduct on Transnational Corporations was unsuccessfully negotiated among developed, developing and socialist countries between 1972 and 1992 in the context of a proposed ‘‘New International Economic Order.’’ Socialist ones (e.g., the USSR and China) by and large did not permit FDI while developing countries were keen to minimize the negative economic, social and political effects of FDI on their young nation-states. Developed countries led by the United States and major European states were mainly concerned about protecting the investments of their firms abroad in terms of fair and equitable treatment, of prompt, adequate and effective compensation upon expropriation, and of the right to repatriate convertible profits. Since ‘‘Western’’ countries were already obtaining such property protection through the ILO and OECD voluntary agreements, they were not disposed to yield to the developing countries’ demands which included the obligatory transfer of technologies to local firms (Sauvant, 2015a) – hence, the developed countries’ strong opposition to the proposed code (Jones, 2005, p. 222). In addition, as the negotiations for a U.N. code stretched out over the 1970s and 1980s, developing countries became more interested in attracting FDI after 1980 when many bilateral investment treaties (BITs) were signed so that the improved international economic environment no longer justified a complementary U.N. agreement. While oil-producing nations managed to create the OPEC cartel in the early 1970s, this approach did not work across other natural resources. Instead, the growing privatization of state enterprises and the liberalization of economic activities almost everywhere reflected the increasing importance of private entrepreneurship in a world economy that now linked national markets and international value chains, with most disputes settled through the arbitration process prescribed in the bilateral investment treaties (Sauvant, 2015a) so that the same governments that recently nationalized MNEs now welcomed their technology, exports and managerial expertise. Altogether,

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these developments contributed to the end of the Confrontation period around 1980. Table 1 identifies the new concepts, typologies, theories and methodologies that were associated with this era of conflicting relations between MNEs and sovereign states.

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governments and of proactive versus reactive strategies became popular while Fayerweather (1969) distinguished the political task of ‘‘accommodating interests and reducing conflicts’’ from the economic function of transferring resources, the social one of bridging cultural differences and the organizational role of minimizing MNE fragmentation

2.2. Emerging concepts 2.4. Postwar theories The exercise of sovereignty by governments eager to promote or protect their national interests did generate often negative investment climates that created political risks – a topic which, to this day, has dominated the analyses related to IBGR (Stevens, Xie, & Peng, 2015). For that matter, the task of the then new ‘‘Public Affairs’’ function has remained the minimization of political risk (Boddewyn, 2007). In this context, Robinson (1964) warned early on about the ‘‘political vulnerability’’ of MNEs, and his rigorous tests for justifying a particular FDI as legitimate and sustainable were the precursors of criteria developed later on under the label of ‘‘corporate social responsibilities’’ (CSR). The extraterritorial application of U.S. laws (e.g., antitrust, taxation and antibribery) to some of the actions of U.S. firms operating outside the United States generated foreign outcries also associated with the feeling of newly developing countries that they were too dependent (dependencia) on developed ones which got most of the benefits generated by MNEs. Bilateral tax treaties (BITs) were signed to deal with such problem as the transfer pricing of the goods and services that moved across borders while the General Agreement on Tariffs and Trade represented a major ‘‘multilateral’’ endeavor to facilitate international trade. 2.3. New typologies Root (1968) classified alternative ways of handling political risk in terms of the trilogy avoid, adapt or insure. New dichotomies of centralization versus decentralization of firm policy toward

The obsolescing bargain was the first but lasting IBGR theory, and it was clearly related to the political risk associated with investments of great ‘‘asset specificity’’ as Williamson (1996) would label it later on. Many scholars hinted at this danger but Vernon (1971) explicated it best (Eden, 2000) in terms of investors losing bargaining power after having committed fixed assets in the host country. While numerous studies have pursued the saga of the obsolescing bargain, it was Moran (1975) who first outlined a major way of mitigating it through ‘‘spreading the risk’’ of expropriation among many parties and ‘‘raising the cost’’ for the expropriator. Hymer (1976), thanks to his doctoral mentor Kindleberger (1969), put theoretical clothes on the monopolistic MNE which existed only because it owned advantages that foreign competitors did not have and could not get – at least not without the MNE’s permission as well as the payment of licensing or franchising fees. For FDI to thrive, there had to be some natural failures in markets for factors of production and intermediate goods or some interference by governments as well as artificial market imperfections. Kindleberger also predicted that the nation-state was about through as an economic entity. Behrman (1960) highlighted the fact that governments and MNEs did not understand each other well at this early postwar stage, thereby causing conflicts and unnecessary restraints on FDI, and denying host countries the benefits of foreign capital, technology and management. It was only when home and host

Table 1 The first postwar era of confrontational relations: 1945–1979. New concepts

New typologies

New theories

Dominant methodologies

Political risk (Root, 1968)

Root’s (1968) ‘‘avoid, adapt or insure’’ (by transferring the risk to others) Fayerweather’s (1969, 1973) fourth IB decision-making area of ‘‘handling nationalism and national interest’’

Vernon’s (1971) obsolescing bargain Hymer (1976)/Kindleberger’s (1969) theory of market failures and imperfections – particularly, those generated by government – as explanation of FDI Moran’s (1975) ‘‘spreading the risk and raising the cost of expropriation’’ as a way of countervailing the obsolescing bargain Olson’s (1971) ‘‘The Logic of Collective Action’’ Penrose’s (1959) emphasis on resources – including political ones

Primary field research (e.g., Wells & Gleason, 1995) Private political-risk reports (e.g., from Business International, Inc.)

State sovereignty at bay (Vernon, 1971; Kindleberger, 1969)

Perlmutter’s (1967) ethnocentric, polycentric and geocentric attitudes

National interest The investment climate

Centralization versus decentralization of firm international policy-making Proactive versus reactive firm strategies

National Planning Association’s studies of individual multinational firms

Case studies by historians (e.g., Wilkins, 1974)

Legitimacy (Robinson, 1964; Behrman, 1960) Dependencia The international public-affairs function (Boddewyn & Kapoor, 1972; Boddewyn, 1988; Kapoor & Boddewyn, 1973) Market failures and imperfections as applied to MNEs Technology transfer Extraterritorial application of U.S. laws ‘‘The American Challenge’’ The New International Economic Order Transfer pricing Bilateral tax treaties

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government understood the difference between capital-based ‘‘portfolio investment’’ and technology-bearing ‘‘foreign direct investment’’ that MNE activities became legitimate and welcome. It also took time for researchers to apply the prescriptions of Olson (1971) on achieving collective action despite free-riding and of Penrose (1959) on the firm as a bundle of productive resources – including political ones. 2.5. Research methodology International business–government relations research predated domestic studies in acknowledging the importance of political factors and their risk implications because foreign direct investors could not avoid facing host sovereignties when crossing borders. Primary research was the only methodology available to scholars at the onset of postwar IBGR inquiry to study the organization and management of IBGR. A business school like Harvard could afford many foreign case studies but money was also available from the Ford Foundation, the research firm Business International, Inc. and the U.S. National Foreign Trade Council. These sponsoring organizations’ vouching was equally important for obtaining access to top managers at home and abroad because IBGR topics were and have remained sensitive ones, and companies carefully screen those who request interviews. Primary research also predominated because there were few sets of secondary data that could be used to study this subject so that Wells, Kapoor and Boddewyn – among many others – wrote numerous articles on the structure and conduct of business– government relations, based on their numerous interviews of government officials and business executives in the United States, Western Europe and Asia. Business historians such as Wilkins similarly relied on primary research to produce analyses of U.S. and U.K. multinationals. 2.6. Evaluation Altogether, crucial developments in the relations between governments and MNEs in 1945–1979 were strongly reflected and even amplified by the new postwar concepts, typologies and theories which confirmed that MNEs and governments at home and abroad were confronting each other. In terms of lasting impact, ‘‘political risk’’ has remained the predominant phenomenon associated with IBGR while the ‘‘obsolescing-bargain’’ theory has kept being extended and tested in novel ways in the following decades. 3. The era of more accommodating relations: 1980–2000 3.1. First strife, then accommodation To begin, the 1980s witnessed a lot of strife between lessdeveloped and developed countries about the proposed set of U.N. codes of conduct for MNEs (see above). Therefore, the label ‘‘accommodation’’ can be applied to this period only after this major attempt at global regulation was abandoned as well as following the 1989 fall of the Berlin Wall and the collapse of the Soviet Union shortly thereafter. However, toward the end of this period, pro-market initiatives to leave the articulation of supply and demand to market forces were upset by the 1997–1998 Asian Crisis that destabilized a number of developing countries and put the disciplining role of the International Monetary Fund into question (see below). Hence, ‘‘accommodation’’ reigned only briefly if brightly in-between. Thus, during the 1990s, 95 percent of national FDI policy changes worldwide made the investment climate more welcoming for MNEs, national screening agencies were replaced by investment promotion agencies – ‘‘red carpets’’ substituting for ‘‘red

tape’’ – and the number of BITs geared to protect foreign investors rose from 386 at the end of the 1980s to 1719 in 1999 (Sauvant, 2012). Most BITs came to include provisions that ensured the right of establishment and ‘‘national treatment’’ as well as benefiting from ‘‘most-favored nation’’ clauses. ‘‘Neo-liberalism’’ accounted for the turn toward the market system in many emerging economies and for the openness of the world economy while MNEs came to be seen as the main drivers in the globalization of capitalism, regional integration (e.g., the European Union) and responsive corporate governance. Actually, ‘‘accommodation’’ often meant compliance of the developing world to the ‘‘Western’’ model designed to ‘‘make the globe safe for MNEs’’ (Sauvant, 2012). As Marxist critic Radice (2014, p. 30) later put it: ‘‘Over this period, those seeking reformist goals that required restrictions on TNC [trans-national corporations] activities have suffered defeat after defeat, especially through the transfer of state enterprises to the private sector, the outlawing of discriminatory policies toward foreign capital, and relentless assault on trade-union rights.’’ What came to be called the ‘‘Washington Consensus’’ mirrored the temporary triumph of liberal capitalism and of disciplining supranational organizations such as the International Monetary Fund and the World Bank. This expression originally referred to a set of specific 1989 IMF policy recommendations designed, among others, to open and link developing countries to global markets and to strengthen the influence of domestic market forces at the expense of the state. Thus, Eden (1993, p. 2) remarked that: In fact, the increased competitiveness of firms on a global scale. . . has forced nation-states to reconsider their policies vis-a`-vis MNEs. States have moved from confrontation to co-operation with the global firms in their midst, from regulating to encouraging entry, from taxing to subsidizing, from opposition to partnership. . . [In] the 1990s, MNEs and nation-states are now seen as partners in the race to engineer competitive advantage and move up the value chain to higher value added and more technically sophisticated products. 3.2. The tools of accommodation The World Trade Organization (WTO) was established in 1994 as a successor to the GATT organization to liberalize international trade on a multilateral basis. The WTO agreement established the obligations of transparency and non-discrimination of government actions as far as trade and investment in services are concerned, included clearer rules for the protection of intellectual property rights and offered often stronger disputesettlement mechanisms. These developments highlighted the primary influence of developed countries in WTO decisions but they also provided a powerful stimulus for the growth of the antiglobalization movement in the late 1990s (Jones, 2005, p. 223). Meanwhile, regional integration in Western Europe and North America in the 1980s and 1990s led to the harmonization of national laws and the removal of many regulatory barriers by partly abridging country sovereignties in favor of such regional jurisdictions as the European Union (EU) and the North American Free Trade Agreement (NAFTA). Yet, governments were demanding greater performance from the MNEs operating within their borders because states now viewed MNEs as the means by which national competitive advantage could be generated and sustained. Still, the balance of power had temporarily shifted away from them as the flexibility of firms increased relative to nation-states which were now less free to impose regulations on MNEs and more likely to compete in attracting inward FDI.

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Table 2 The second postwar era of accommodating relations: 1980–2000. New concepts

New typologies

New theories

Dominant methodologies

Nonmarket (Baron, 1995)

Triangles of MNEs, governments and civil-society organizations (Doh & Teegen, 2003) and of firm versus firm, firm versus government and government versus government competition (Stopford & Strange, 1991) Porter’s (1980) generic strategies of low cost, product differentiation and niche

Eclectic theory (Dunning, 1980)

Start of secondary data modeling and analysis

Williamson’s (1996) The Economic Institutions of Capitalism

Boddewyn’s (1988) political strategy as a complement to the seeking of efficiency and market-effectiveness Dunning’s (1980) ownership, location and internalization advantages

North’s (1990) Institutions, Institutional Change and Economic Performance Donaldson’s (1989) The Ethics of International Business

Numerous analyses of the type: political behavior = F(X) – and vice versa Low level of primary research except by historians (e.g., Geoffrey Jones) New surveys conducted by UNCTAD in the form of World Investment Reports started in 1991

Institutional voids (Khanna & Palepu, 1997)

Regionalization (Rugman, 2000) versus globalization (Ohmae, 1985)

Internalization theory (Buckley & Casson, 1976; Rugman, 1981)

Government as a factor of production (Kindleberger, 1969; Boddewyn, 1988)

Gladwin and Walter’s (1980) ‘‘modes of conflict management’’ (domination, integration, compromise, neglect and appeasement) Political tools of information, money and grassroot mobilization (Hillman & Hitt, 1999) National responsiveness versus global integration (Bartlett and Goshal, 1992) Bargaining versus non-bargaining strategies (Boddewyn & Brewer, 1994) Triad Power (USA, Japan and the EU) (Ohmae, 1985)

Stakeholders (Freeman, 1984)

Non-territorial actors (NGOs, MNEs, IMF, business associations, etc.) Civil society (Doh & Teegen, 2003)

Corporate social responsibility

Competitive advantage (Porter, 1980, 1991) Liability of foreignness (Zaheer, 1995) Shelter strategy (Rugman & Verbeke, 1993) Globalization Alliance capitalism (Dunning, 1997) Corporate governance Corporate codes of conduct Bilateral Investment Treaties Washington Consensus Clash of civilizations (Huntington, 1996)

However, the realities of uneven development and of the degraded natural environment became more apparent during this accommodating period. In addition, the Multilateral Agreement on Investment (MAI) proposed by the OECD and designed to limit states’ powers to restrict the freedom of movement of capital was defeated by a coalition of countries (e.g., Canada, France and Australia) and progressive social movements (e.g., Friends of the Earth and the Sierra Club) which were opposed to unlimited corporate power even though bilateral investment treaties often achieved the MAI’s goals (Sauvant, 2012). For the first time, one witnessed the emergence of a global civil society determined to be legitimate participants in what transpired between MNEs and states, and which expressed itself in November 1999 during the ‘‘Battle of Seattle’’ where protesters blocked a meeting of WTO officials who were to address some of the investment issues brought up in the MAI proposal. 3.3. The end of accommodation By 1995, Vernon had already reached the conclusion that the tranquility of MNE-state relations was drawing to a close (Eden, 2000, p. 337). However, the terminal shock came from the 1997– 1998 Asian Financial Crisis which spread from Thailand to Malaysia, the Philippines, Indonesia and South Korea as these countries’ currencies were devalued while stock-market and realestate prices collapsed on account of government policies that distorted incentives within the lender-borrower relationship. As

asset prices and the values of local currencies fell, individuals and companies defaulted on their foreign-debt obligations. The IMF came to the rescue of these countries, thereby enabling them to avoid default but its ‘‘rescue packages’’ were tied to currency, banking and financial-system reforms so that, later on, the IMF was criticized for encouraging the developing countries of Asia to adopt the path of ‘‘fast-track capitalism’’ by eliminating restrictions on capital flows, maintaining high domestic interest rates to attract portfolio investment and bank capital, and the pegging of national currencies to the U.S. dollar in order to reassure foreign investors against currency risk. Hence, this crisis seriously challenged the Washington Consensus which favored open markets, and it ushered in a new mood in IBGR as developing countries became more assertive and increasingly favored regional (e.g., in Asia) or bilateral trade agreements in lieu of relying on multilateral institutions such as the IMF, World Bank and WTO. Table 2 reveals the ‘‘new terms’’ that were developed during this second era which, in some sense, was the golden age of IBGR research because it became acknowledged as a major field of study, and many accomplishments accompanied this recognition.1 3.4. New concepts and typologies Nonmarket was the dominant concept in this era as this term came to apply to crucial ‘‘non-territorial actors’’ – civil society, 1 See the comprehensive listing and classification of the vast pre-2000 literature on the public-affairs function and its related dimensions in Griffin et al. (2001).

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NGOs and the media – as well as to part of the business environment and to a distinct strategy. Equally important was Freeman’s (1984) concept of stakeholders which is now indelibly associated with the ‘‘corporate social responsibilities’’ of firms while Huntington’s (1996) ‘‘Clash of Civilizations’’ anticipated many forthcoming cultural collisions – particularly, in the Near and Middle Easts. New typologies abounded, including Ohmae’s (1985) Triad Power of North-American, Western-European and Japanese economies and firms, and Dunning’s (1994) triple ownership, internalization and location advantages. Whether firms globalize (Ohmae, 1985) or regionalize (Rugman, 2000) became a hot issue which had implications for where IBGR were mainly conducted – and so did the choice between national responsiveness and global integration (Bartlett & Goshal, 1992). In addition, Gladwin and Walter (1980) developed a then popular matrix of ‘‘modes of conflict management’’ that relied on degrees of ‘‘assertiveness’’ and ‘‘cooperativeness’’ between MNEs and socio-political actors that interacted through the five modes of domination, integration, neglect, appeasement and sharing/compromise. Boddewyn (1988) emphasized the nonmarket perspective in his positioning of international political strategy as a fourth generic complementary to Porter’s (1980) ‘‘generic’’ economic strategies of cost, product differentiation and niche. Boddewyn, together with Thomas Brewer (1994), acknowledged the ‘‘principal and agent’’ nature of business–government relations whereby it is not always clear who the ‘‘master’’ is when firms and states interact (Peng, 2000). Boddewyn and Brewer (1994) also developed the distinction between bargaining (conflict or partnership) and nonbargaining (compliance, avoidance/exit or circumvention) international political strategies. Later on (Rugman & Verbeke, 1993, p. 7) developed a parallel conception of shelter strategies, that does not build on firm-specific advantages to achieve economic performance but relies instead on such non-efficiency-based means as political behavior designed to eliminate workable competition by erecting government-imposed barriers against rivals. There was much interest in government as a factor of production or resource that international firms often need in the management of their chain of economic value-adding activities that cross borders (Boddewyn & Brewer, 1994; Boddewyn, 1988; Kindleberger, 1969). However, the ‘‘intermediate products’’ generated by governments (e.g., permits, subsidies and legitimacy) are not a ‘‘given’’ but a ‘‘taken’’ or a ‘‘kept’’ that requires political action in the context of an ‘‘enacted environment.’’ These perspectives conflicted with the view of the government as a superordinate institution embodying the national interest – an institution that can be plied with ‘‘voice’’ but should not be captured or corrupted. In this context, NGOs do pressure MNEs to respond to demands for socially responsible strategies, and they can help these firms overcome the liability of foreignness (Zaheer, 1995) as well as the hazards posed by institutional voids (Khanna & Palepu, 1997), thereby reducing the transaction costs of operating in underdeveloped environments. Corporate codes of conduct started multiplying in the 1990s regarding such issues as child labor in developing countries and environmental protection everywhere (Jones, 2005, p. 222). These voluntary codes substitute for regulations when governments are unable to enact and enforce laws but skeptics think that they are smokescreens designed to prevent the establishment of a binding set of international laws regarding FDI (Sauvant, 2015b). 3.5. New theories Williamson (1996) and North (1990) developed powerful theories on transaction costs and institutionalization but their impact manifested itself mainly in the next decade as far as the

study of IBGR is concerned. Dunning’s (1994) ‘‘eclectic theory’’ became widely used in IBGR research while Grosse and Behrman (1990, p. 119) tried to develop a theory of international business that would differentiate it from those of a universal nature such as comparative-advantage which applies everywhere. They concluded that: [A] theory of international business must be a theory of obstructions to markets (interventions and distortions), flows of information, movements of people, etc. imposed by governments. The purpose of such interventions is to redistribute the benefits and burdens as compared to those generated by market forces. They were correct to stress that, when trade and investment cross borders, they enter into different sovereignties where the national government will intervene but this is a fact rather than an explanation – for example, of why firms choose a joint venture over a wholly owned subsidiary on account of such political factors as sovereign obstructions of markets. In this context, IBGR researchers often borrowed from resource-dependence theory, the resource-based view and the nascent ethical field. No major theory directly associated with international political behavior was developed during this 1980–2000 period. However, internalization theory (Rugman, 1981), which can explain why MNEs may assume the functions of missing or inefficient nonmarket institutions such as the state, did match the spirit of accommodation that encouraged governments to yield some of their responsibilities to market firms. 3.6. New methodologies Apart from case studies, there was a major decline in primary research and its ‘‘qualitative’’ character that came to lose validity. Instead, theory-infused proposition-testing through the use of secondary-data sets came to dominate the study of both domestic and international business–government relations – except when historians such as Jones (2005) researched individual MNEs and global industries. Political factors were treated as both dependent and independent variables, allowing many theoretical propositions to be tested. Well-documented UNCTAD World Investment Reports began to be published in 1991, and they have provided valuable surveys and analyses of FDI activities and MNEs ever since. 3.7. Borrowings from the domestic literature Although international-business researchers were the first to acknowledge the importance of political factors because going overseas entails entering new sovereignties and encountering different governments, a very important literature grew on the conduct of domestic business–government relations. Thus, the concept of ‘‘domain’’ as task environment was first developed in U.S. studies and then applied to international-business situations. Besides, Mahon (1993, p. 196) provided a general definition of business political behavior in process terms: ‘‘Those actions taken to favorably position the firm in its nonmarket environments by managing those uncertainties and resource dependences stemming from the influence and/or resistance of other nonmarket actors that (can) affect the firm’s overall economic performance.’’ Mitnick (1993, p. 67) stressed that: ‘‘Regulation has provided (and continues to provide) significant business benefits and business opportunities.’’ Hence, the continuing interest in ‘‘the strategic uses of regulation’’ and ‘‘the seeking of regulation’’ by business because such behaviors can provide competitive advantages to those firms that use the coercive power of the state to their own benefit (Mitnick, 1993, p. 74). Those insights as well as those

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of Hillman and Hitt (1999) about the use of information, money and votes in corporate political strategy were used in IBGR research. 3.8. Evaluation Again, novel concepts, typologies and theories were added to our research vocabulary during the 1980–2000 period when the spirit of ‘‘accommodation’’ expressed the relief felt after more than three decades of ‘‘confrontation.’’ Yet, some of the key terms of Table 2 above rather predicted major controversies that took place after 2000 – for example, about sustainable development and institutional voids.

4. The present era of competing relations: from 2001 to the foreseeable future 4.1. An era of competition This period had barely begun when the terrorist attacks on New York City and Washington, DC, took place on September 11, 2001 and started ‘‘the war on terror.’’ Yet, as Kolk (in this issue) points out, too few international-business studies have focused on the role of MNEs in furthering peace and/or conflict, on the factors influencing MNE responses to violent conflict and on the survival of MNE subsidiaries in conflict zones. Still, I prefer to characterize the current period since 2001 in terms of the various competitions that have recast the relations among MNEs, governments and NGOs. Actually, competition was to be expected if only because the number of relevant actors has multiplied since the early postWWII era when only MNEs and governments together with a few supranational organizations (e.g., the IMF, the World Bank and GATT) filled the scene. Now, a large variety of stakeholders have come to bear on IBGR in the forms of NGOs (countless local and national, and some 40,000 international ones), sovereign wealth funds and private-equity firms while all sorts of governments are now sovereign – not only democratic and authoritarian ones but also corporatist, kleptocratic (where top leaders and their families use the state to enrich themselves) and failing states. Hence, this era has witnessed the emergence of ‘‘private political authority’’ through the rise of influential non-state actors (i.e., MNEs, NGOs and international organizations) as well as of criminal bodies and terrorist groups which hold competing power in international politics (Kobrin, 2015, p. 268). However, competition took several other major guises during the current period, as detailed in the following sections. 4.2. Competition from emerging-market MNEs In 2010, there were already over 100,000 MNEs worldwide controlling over one million foreign affiliates in a growing number of home and host countries. At least 30,000 MNEs are now headquartered outside the developed world, and they amounted to some 36 percent of world FDI outflows in 2014. Among the 20 largest investors in that year, nine were from developing and transition economies. Hence, a major development has been the competition of MNEs from these countries – particularly, from what are now called ‘‘emerging’’ economies/markets to reflect their intended move toward the ‘‘rule of law’’ as well as their attractiveness as fastgrowing host countries such as China and India. Increasingly, these emerging countries compete against developed economies for their share of world trade, investment, employment, innovation, taxes and other benefits generated by MNEs, FDI and world trade while Western models of capitalism have been pitched against the Chinese ‘‘developmental state’’ (Knight, 2014).

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Emerging-market MNEs have also generated political unease because a vast majority of them are state-owned or subsidized, and their favorite way of gaining location in developed countries has been through mergers and acquisitions (M&As) in 80 percent of the cases rather than through greenfield investments. Some of these new MNEs are also financed by sovereign wealth funds from Dubai, China, Russia and Norway that must invest abroad some of the savings generated by their state-owned oil companies (Aharoni, 2014, p. 2–6). Consequently, Western MNEs have felt the competitive sting of those new ones while developed-country governments have increased their scrutiny of M&As by emerging-market MNEs and rejected some major ones because they worry about the foreign acquisition of local firms of strategic significance in terms of R&D, jobs, taxes and national security. Meanwhile, with the help of trade liberalization and the cheapening of transportation and communication, Western MNEs have placed groups of workers located in both developed and developing countries in rivalry with each other for the employment these firms do provide. In this regard, the legal domicile of a MNE matters little if its investments, inventions, jobs and profits can be made, moved and kept elsewhere. Hence, a current and major political issue concerns whether a state should allow firms operating within its legal boundaries to switch their added value to other countries through transfer pricing as well as legal and tax maneuvers although governments have so far failed to agree on the distribution of FDI gains. Meanwhile, the postwar’s ‘‘bipolarity’’ with the USSR has been replaced by one between the United States and China whose model of state capitalism and governmentcontrolled economic development as well as of its controversial treatment of worker and human rights now competes against liberal capitalism (Bower, Leonard, & Paine, 2011). 4.3. Voluntary versus mandatory rules Echoing the previous period’s battles about a New International Economic Order, competition has resumed regarding the character of the rules applying to MNE behavior. Now as before, international investors prefer regulatory predictability over volatility and they favor voluntary rules such as the OECD guidelines while governments like rule flexibility in achieving their ends (Sauvant, 2015b, p. 66–67). Hence, MNEs have broadly supported the United Nation’s Global Compact of 2000 (Sagafi-Nejad & Dunning, 2008), which consists of ten ‘‘voluntary principles’’ and has been followed by the eight Millennium Development Goals of 2000 and the 17 Sustainable Development Goals to be approved and further specified into subsidiary targets in the Fall of 2015.2 However, left-leaning developing countries led by Ecuador and Venezuela and supported by China, India and many developing countries have promoted mandatory rules. Actually, a precedent for such rules may have been created through a 2014 draft resolution submitted by Ecuador and South Africa. This resolution was supported by more than 20 developing countries for the purpose of elaborating a legally binding instrument regulating the activities of MNEs and other business enterprises in the matter of international human rights. In parallel, Norway, supported by 22 countries from all regions of the world, moved to consider legal frameworks that would provide more effective remedial avenues for individuals and communities that were victims of human-rights abuses by business firms. Ultimately, the UN Human Rights Council adopted by consensus in the Fall 2 Kolk (in this issue) has reconceptualized the proposed 17 U.N. Sustainable Development Goals of 2015 in terms of ‘‘People, Planet, Prosperity, Dignity and Justice’’ with emphasis on ending poverty, fighting inequalities and promoting safe and peaceful societies as well as strong institutions.

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of 2014 the Norwegian resolution favoring mandatory regulation (Sauvant, 2015b, p. 70). 4.4. Rival implications of sustainable development The corporate social responsibilities of business firms in general and of multinationals in particular have come increasingly to be defined in terms of their impact on ‘‘sustainable development’’ although this goal itself has generated fundamentally different conceptions (Bebbington, 2001). The version favored by business assumes the continuous and untrammeled pursuit of economic growth to provide the resources necessary for tackling the huge global problems of poverty, disease, malnutrition, poor infrastructure, inferior education, climate change and the like. In addition, it requires that these resources be constantly expanded and improved through innovation and be efficiently husbanded so as to guarantee future high levels of consumption and wealth accumulation. By committing itself openly, explicitly and responsibly to this project, business firms, in cooperation with governments and NGOs, would be able to deliver such sustainable development. The competing view is much more sober and drastic, and it incorporates major non-economic goals in a ‘‘post-growth’’ world. To be sure, there has to be ‘‘eco-efficiency’’ in using the environment but there must also be ‘‘eco-justice’’ in the distribution of the fruits of economic development. In particular, the latter’s benefits and costs within the current time period (intragenerational equity) must be balanced with those of future ones (inter-generational equity) although this goal may demand reduced and restricted consumption patterns as well as decreases in levels of material wealth in the developed world – a project that would require the coercive intervention of the state. In this regard, anti-globalization protests around the year 2000 had already coalesced around the view that current economic growth was both socially regressive and environmentally unsustainable so that it was thought that Western consumption levels had to be restricted in order for everyone on this planet to live decently. Thereby, the optimistic view that business can unproblematically contribute to sustainable development is critically rejected although this is a projection which business prefers not to face and discuss openly (Bebbington, 2001). 4.5. Competition between SOEs and private firms Rivalry has also grown between state-owned enterprises (SOEs) or state-subsidized ones and privately owned firms. The former are particularly present and powerful in the BRIC countries of Brazil, Russia, India and China – all emerging economies distinguished by both their attractive size and sometimes troubled economic growth, and by their significant influence on regional and global affairs. Thus, Chinese FDI in Africa is challenging the ‘‘conditional’’ nature of loans from the IMF and World Bank which have required recipient governments to implement restructuring programs in line with open-market ideology. Instead, Chinese FDI – much of it through SOEs – has focused on obtaining raw materials without attempting any political and economic reform or respect for human rights while China’s government provides financing, infrastructure and community development to the host countries (Jackson, Louw, Zhao, Boojhawon, & Fang, 2014). In this manner, state capitalism has defied predictions of its demise after the fall of the Berlin Wall in 1989 even though it must be noted that the domestic private sector in China already represented half of its GDP in 2005 and has kept growing ever since (Aharoni, 2014, p. 8), with private enterprise also thriving in India and Brazil.

4.6. Cooperation Besides competing with them, MNEs have also partnered with governments, NGOs, labor representatives within the ILO, and such supra-national organizations as the United Nations. Thus, by the end of 2013, some 3268 BITs were in force among numerous countries to balance two-broad but persistent objectives: (1) foreign direct investment protection and liberalization, and (2) preservation of state rights to regulate in the public interest (UNCTAD, 2014, p. 118). While national policies remain predominantly geared toward investment liberalization, the share of regulatory/restrictive ones increased from 6 to 27 percent from 2000 to 2013 (UNCTAD, 2014, p. 106). A recent regulatory development reflecting persistently high domestic unemployment has introduced new approval requirements for the relocations and lay-offs associated with foreign divestment by MNEs (UNCTAD, 2014, p. 108). For that matter, job creation remains the dominant motive for investment incentives. Further testifying to cooperation, more than 12,000 corporate participants and other stakeholders from over 145 countries have signed the 2000 UN Global Compact which is the largest voluntary corporate-responsibility initiative in the world and combines the best properties of the United Nations – that is, moral authority and convening power – with the private sector’s solution-finding strengths as well as the expertise and capacities of such key stakeholders as NGOs. We saw that this compact has been complemented by the eight Millennium Development Goals (MDGs) and by the 17 Sustainable Development Goals (SDGs) for 2015–2030 although ‘‘freedom to trade’’ is not listed among the U.N. Human Rights. In this regard, it is ironic that a separate analysis by the Post2015 Consensus organization discussing the cheapest ways of improving the state of the world in terms of ‘‘the most bang for the buck,’’ showed that ‘‘trade liberalization’’ came way ahead of all the other goals and subgoals of the SDGs, with a payout of $2011 per dollar spent (The Economist, 24 January 2015, p. 61). 4.7. The 2007–2008 financial crisis This economic debacle was the worst one since the Great Depression of the 1930s but, fortunately, governments’ protectionist reactions were limited although world trade and investment declined significantly for a few years. The 2010 U.S. DoddFrank Wall Street Reform and Consumer Protection Act was passed for these purposes but has complicated the financing of business abroad and raised its cost. Altogether, several major ‘‘competitions’’ have marked the post-Millenium period, and Table 3 offers a listing of the new concepts, typologies, theories and methodologies that have partly reflected these current rivalries. 4.8. Dominant concepts and typologies Eminent has been the concept of emerging markets3 which has generated countless studies including those of the MNEs originating from these economies so that the origins and destinations of foreign direct investments now truly reach a global scale. Besides, being among the better functioning institutions in countries where governments are weak and NGOs too small. MNEs have been 3 Underdevelopment has been associated with poor educational systems, income inequality, limited infrastructure, a large informal sector, corruption, obsolete legal and regulatory frameworks and, in many cases, a high cost of doing business. However, emerging markets among developing countries are those slowly moving to a market system and reliance on the rule of law, and they have exhibited superior rates of growth, which makes them very attractive as trade partners and investment sites.

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Table 3 The present era of competition from 2001 on. New concepts

New typologies

New theories

Dominant methodologies

Emerging markets

Emerging markets versus developed countries and failed states Four-way classification of firms’ assistance to, or substitution for, governmental roles: supplement, support, stimulate and substitute (Valente & Crane, 2010) Varieties of capitalisms (Whitley, 1999)

Apex of institutional theory (North, 1990; Peng, 2000; Scott, 1992)

Secondary research

Apex of post-Westphalia world-order perspective (Kobrin, 2015)

UNCTAD World Investment Reports (1991 and 2014)

Apex of Williamson’s analysis (1996) of market entry governance modes (transaction-cost economics) Theory of political activity (Henisz & Zelner, 2003, 2010, 2012)

Columbia FDI Perspectives

Post-Westphalian states (Kobrin, 2011)

Politicized role of MNEs (Scherer & Palazzo, 2011) Public duties of private organizations

Sustainable development

Institutional and other distances

Renewed theory development in light of the historical and institutional approaches

Ramamurti (2001, 2003, 2004, 2005) view of international business regulation as being a dynamic twotier multiparty process Philanthropy and political influence as inducement mechanisms that are non-contractual in nature (Boddewyn, 2014; Hillman et al., 2004; Verbeke & Kano, 2013)

Relational contracting Offshoring of production Regionalization (Rugman, 2000) and semi-globalization (Ghemawat, 2003) Anti-globalization reaction Developmental state (China) State capitalism and state enterprises BRIC countries Public roles of NGOs (Doh & Teegen, 2003) Public-private partnerships Private Military Companies U.N. Global Compact Soft law Sovereign wealth funds Inequality Terrorism

called upon to perform societal functions which have become part of their nonmarket strategies of providing the goods and services needed to fill the emerging markets’ institutional voids previously evoked by Khanna and Palepu (1997). Hence, Scherer and Palazzo (2011) proposed a politicized conceptualization of the MNE and of its corporate social responsibilities, because private firms have internalized many duties, tasks and functions that, in the past, had been considered to be governmental roles and responsibilities in such sectors as homeland security, disaster relief, health care and education. Indeed, private firms have become key institutional players with a degree of political influence that rivals and sometimes eclipses the power of governments (Matten, 2009, p. 568–570). In the same vein, Kobrin (2011) developed the picture of a postWestphalian world where the power of national governments has shrunk on account of the globalization of many economic activities that now escape state control and of the devolution of public duties and authority to private actors. These developments have blurred the line between the public and private spheres as well as between politics and markets since private MNEs are increasingly seen as providers of ‘‘public goods.’’ In a related vein, Valente and Crane (2010) analyzed the various forms of assistance – supplement, support, stimulate and substitute – that MNEs and NGOs can provide governments in developing countries. Kobrin (2011) also stated that the assumption of political authority by MNEs entails reciprocal obligations and duties, and that these firms increasingly belong to public–private regimes that

deliver soft-law solutions through corporate or industrial codes of conduct. Hence, government mandates and restraints are now complemented by private standards and practices negotiated between MNEs and major NGOs, such as the one concerning fair pay for coffee-growers in developing countries. Besides, Kobrin argued that MNEs should be held accountable for their social responsibilities worldwide, irrespective of whether or not a local government chooses or is able to enforce this responsibility. While national governments have somewhat decreased in importance, the regional level – both the supranational one of the European Union and NAFTA, and the subnational level of provinces (e.g., Belgium’s Flanders) and key cities (e.g., Singapore and Hong Kong) – have become major actors when MNEs negotiate with governments. Hence, Rugman (2000) argued that the internationalization of firms of all sizes proceeds mostly in regional patterns – as also expressed by Ghemawat’s (2003) ‘‘semi-globalization’’ – which reduce the need for multilateral agreements. Meanwhile, joint ventures, co-production agreements and offshore sourcing of production have often replaced the full ownership of subsidiaries by MNEs, thereby reducing the danger of government expropriation. 4.9. New theories Institutional theory according to North (1990) and Scott (1992) has been the favorite one for the study of emerging markets in terms of ascertaining the impact of various distances (geographic,

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economic, administrative, psychic, cultural, institutional, etc.), constraints (normative, cognitive and regulative) and the relative importance of relational versus contractual exchanges in countries like China where personal relationships with government officials on a constant and individual basis matter very much (Gupta, 2011; Peng, Wang, & Yiang, 2008; Peng, Sun, Pinkham, & Chen, 2009; Peng, 2003). In fact, systems of either relational contracting or governmental impositions – often referred to respectively as private and state orderings – do function to control contractual hazards effectively if at higher transaction costs than through public ordering and its ‘‘rule of law’’ (Boddewyn & Doh, 2011; Gupta, 2011; Li & Filer, 2007). Besides, institutional theory has been used to explain MNE behavior under the uncertainty generated by growing political risk in foreign locations while the notorious economic success of China and other performing emerging markets has encouraged analyses and comparisons of the ‘‘varieties of capitalism’’ all over the world (e.g., Whitley, 1999; Witt & Redding, 2012). In addition, an article by Ahuja and Yayavaram (2011) on ‘‘influence rents’’ has attempted to explain on the basis of institutional theory the extra profits earned by a firm when the local rules of the game (laws, regulations and informal norms) can be bent. It has even considered ‘‘how institutions fail and how their workings can be manipulated to create institutional rents or business opportunities’’ (Ahuja & Yayavaram, 2011, p. 1637). Also popular has been Williamson’s (1996) transaction-cost based view of market and hierarchy as fundamental governance modes used in entering markets and operating there – a theory to which Hennart (1993) contributed by highlighting, among others, the transaction costs generated by business–government negotiations. In early 2005, Grosse organized a gathering of the major researchers in the IBGR field, which resulted in the publication of International Business and Government Relations in the 21st Century (2005). In this book, Eden, Lenway, & Schuler, 2005, p. 254 argued that the essential elements of the obsolescingbargain model of yore can and should be retained by reconceptualizing it as a ‘‘political bargaining model’’ where MNE-state relations are viewed as a succession of bargains negotiated between these firms and governments over a wide variety of public policies at the industry level. As in older bargaining models, relative goals, resources and constraints affect the outcome of negotiations. In the same volume, Wells (2005) commented that the blatant expropriation of MNEs in the 1960s and 1970s may have passed but that there were plenty of fights over electricity, water-system and telecommunications projects in the developing world, which showed that investors’ property rights were still quite insecure under a regime of ‘‘creeping expropriation.’’ Besides, Wells analyzed the weapons used and not used by the U.S. Senate and Commerce Department to react against such developments. In particular, bilateral investment treaties did multiply in order to add credibility to commitments made to investors by developing countries, and U.S. embassies have intervened strongly and often to resolve local disputes. Also in this book, Ramamurti (2005) stated that the IB literature is relatively thin on how these firms manage IBGR globally – with influencing public policy at the global level being the ultimate challenge for MNEs operating in industries where intellectual property needs extreme protection. He concluded that MNEs must (and do) work through home and host governments to bring about global convergence of regulations by using international institutions as forums where a transition can be managed to get these rules established worldwide.

Elsewhere, Ramamurti (2004) provided an excellent review of issues in the early 2000s. In particular, he concluded that the rules under which MNEs operate are frequently the product of complex international negotiations between MNEs, their home governments and international institutions. For example, triad-based MNEs are allying with one another to push for the global convergence of regulations in e-commerce, accounting standards, capital-market regulation, intellectual-property rights, health and safety norms, and antitrust policy. This growing influence of MNEs over global policy making explains the rise of some 40,000 international NGOs concerned about this development. Thus, environmental groups such as Green Peace and political ones such as Amnesty International have played increasing roles in driving government policy and in pushing firms to respond to environmental protection and worker-rights issues, among others (Doh & Teegen, 2003). To explain why FDI had increased in developing countries in the late 1990s, Ramamurti (2001) postulated that business–government negotiations can no longer be viewed as static two-party bargaining but rather as a dynamic two-tier multi-party negotiation system. The first-tier bargaining occurs between host developing countries and home industrialized nations, and it takes place bilaterally or through multilateral institutions such as the IMF, the World Bank and the World Trade Organization while negotiations in Tier-2 take place between individual MNEs and host governments. However, industrialized countries have used Tier-1 bargaining to weaken the hand of host-governments in Tier2 negotiations while strengthening that of their MNEs. This model resembles the one Chinese firms use in Africa to obtain raw materials (see above). Doh, together with several co-authors (e.g., Doh & Teegen, 2003; Teegen, Doh, & Vachani, 2004), studied the growing role of civil-society’s NGOs in providing aid to failing states as well as their collaboration with MNEs to mitigate the latter’s liabilities of foreignness (Zaheer, 1995) and privateness4 (Bhanji & Oxley, 2013). While no supranational agency has yet managed to control MNEs, the rise of numerous and effective NGOs has filled the need for active ‘‘watchdogs’’ of these firms. Henisz has contributed several theoretical studies, alone or with such co-authors as Zelner, on three major IBGR issues: (1) can foreign investors rely on a host country’s announced public policies – in other words, obtain ‘‘credible commitments’’ from governments; (2) can they depend on their local joint-venture partners who may use their political influence to cheat the foreign investor, and (3) what must private investors do to win the hearts and minds of external stakeholders in order to gain and retain their ‘‘license to operate’’ and thereby generate sustainable supranormal returns for shareholders? In other words, MNEs must safeguard against both political and contractual hazards as well as ‘‘engineer the public’s consent’’ through ‘‘corporate diplomacy’’ (Henisz & Zelner, 2003, 2010, 2012; Henisz, 2013, 2014). Direct-expropriation risk has faded but sophisticated forms of regulatory control have increased policy risk so that traditional approaches of hedging risk and of buying insurance now offer little protection against it. Instead, generating political capital, employing new analytical skills and tools, mastering the art of ‘‘political spin’’ and hitting the pressure points of local decisionmakers are more likely to become a source of competitive advantage in addition to being a means of avoiding losses (Henisz & Zelner, 2012).

4 The liability of privateness refers to the fact that privately-owned enterprises have lower reputations than not-for-profit government agencies and NGOs because of the former’s for-profit nature (Bhanji & Oxley, 2013). Allying with NGOs allows MNEs to reduce this liability.

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declining output in new knowledge creation over the past two decades (Buckley, 2002). Altogether, many macro and micro events have happened since 2000, yet too few of them have been investigated in the recent IB literature5 in terms of their implications for the organization and management of international business–government relations and of the public-affairs function in MNEs. There have been numerous modeling attempts of linking international business to political behavior through various independent and control variables but they have not sufficed to advance our knowledge of IBGR activities where it matters. Primary research designed to achieve ‘‘contextual intelligence’’ may well be necessary to address such issues (Dhanaraj & Khanna, 2011; Khanna, 2014).

In a renewed effort at theory development, Boddewyn (2014) argued that the two very different practices of philanthropic donations and lobbying can be conceptually and theoretically related to the practice of reciprocal exchange because they are both ‘‘non-contractual’’ in nature and aimed exclusively at nonmarket organizations and actors (e.g., NGOs, government agencies and politicians). Similarly, Hillman, Keim, & Schuler, 2004, p. 852) pointed out that ‘‘there is a melding between [corporate political action] and corporate social performance’’ because some social activities amount to political behaviors as when community projects facilitate access to local politicians and when the threat of government controls leads to industry self-regulation through business codes of conduct. Meanwhile, Verbeke and Kano (2013) demonstrated that the use of ‘‘favors’’ can be interpreted in terms of transaction-cost economics. Finally, the present ‘‘world order’’ has been thoroughly analyzed by Sauvant (2012) who has drawn the current implications of the long search for a ‘‘New International Economic Order’’ (see above) while Kobrin (2015) has depicted the ‘‘new international political disorder’’ that has not paralleled the successful creation of an integrated world economy. Kobrin stressed that global nonmarket strategies, including those involving the relations between governments and MNEs, are nearly impossible when polities remain divided and no new multilateral cooperation is in sight.

IBGR research has focused on the risks and opportunities associated with those sovereign agents, public policies and actions that affect MNEs as well as on the negotiations needed to ‘‘accomplish order in a relation in which potential conflict threatens to undo or upset opportunities to realize mutual gains’’ (Williamson, 1996, p. 12). What, then, can we conclude and anticipate from this analysis of the major 1945–2015 IBGR developments and of the ‘‘new terms’’ that have reflected them?

4.10. Methodology

5.1. Guidelines from the past

Secondary research continues to dominate IBGR study but much of it has been conducted ‘‘under the lamp-post’’ – that is, where the data are available rather than where the real needs for understanding international business–government relations do lie. This kind of research is rivaled in depth by UNCTAD’s annual World Investment Reports (1991, 2014) that deal with the regulation of foreign direct investment and by the Columbia FDI Perspectives on the use of bilateral investment treaties and arbitration (e.g., Sauvant, 2015c). While largely overlooked by IB researchers, historians have kept studying major global industries (e.g., the beauty sector by Jones (2010) and the light and power sector by Hausman, Hertner, & Wilkins, 2011) as well as major MNEs (e.g., ExxonMobil by Coll (2012)). Besides, some major IBGR developments have so far received little attention in the mainstream IB literature. Thus, one finds few treatments of terrorism which has been the major international preoccupation of governments after 9/11 and which has generated new types of MNEs capable of providing military and other assistances to endangered firms and states against terrorists who are now provided with powerful technologies, better recruitment and greater funding thanks to globalization (Czinkota, Knight, Liesch, & Steen, 2010).

The early concept of ‘‘political risk’’ remains the dominant one that keeps assuming new guises until, today, its handling incorporates the broad ‘‘securitization’’ of firms against the terrorism, violence, kidnapping, harassment, vandalism and acts of God (e.g., hurricanes, tornadoes, earthquakes and floodings) that impede international trade and investment (Boddewyn, 2007; Wood & Wright, 2015). Meanwhile, the obsolescing-bargain theory remains the dominant interpretation of a foreign investor’s fluctuating bargaining power when facing political risk. Besides, the number of IBGR issues has multiplied over time, ranging well beyond the original interest in the organization and management of business-state relations. Today, the prosaic but essential process of obtaining a license to operate in a host country takes place in an operating environment made much more complex by additional powerful actors and the search for sustainable development and responsible corporate governance.

4.11. Evaluation Competition has been the defining element of the current period although the scope and quality of IBGR research have not sufficiently kept pace with the new rivalries so that there is some ‘‘disconnect’’ with the real world of international business–government relations. This conclusion is substantiated by Matten (2009, p. 573) who commented that there is still a ‘‘denial of politics’’ in many IB studies while (Lawton, McGuire, & Rajwani, 2013, p. 87) concluded that scholarly research about corporate attempts to engage with governments in ways favorable to the firm has not kept pace with the prevalence of this practice across political systems. Besides, current research practice is dominated by its focusing on the validity and applicability of established theories so that there has been a

5. Conclusions

5.2. Expectations New terms will be needed to reflect the future environment of international business–governments relations, its future actors and their future relationships. This environment is bound to be dominated by new megaregional agreements that, once implemented, would replace the 3200 + bilateral and other international-investment treaties that have so far balanced the interests of MNEs and those of their host nations.6 If concluded, these agreements are likely to have a major impact on global investment’s rule-making besides dealing with such new issues as state-owned enterprises, sovereign wealth funds and regulatory 5 There is, of course, an abundant economic, political and sociological literature that has addressed many of these problems but I am focusing here on IB research exclusively. 6 Three major regional groupings are currently under negotiations. First, the Trans-Pacific Partnership (TPP) involving most countries on both sides of the Pacific Rim; second, the European Union-United States Transatlantic Trade and Investment Partnership (TTIP) including 28 E.U. states and representing 45 percent of global GDP, and third, the Regional Comprehensive Economic Partnership (RCEP) of ASEAN countries plus Australia, China, Japan, India, South Korea and New Zealand but not the United States, and accounting for close to half of the world’s population.

Please cite this article in press as: Boddewyn, J. J. International business–government relations research 1945–2015: Concepts, typologies, theories and methodologies. Journal of World Business (2015), http://dx.doi.org/10.1016/j.jwb.2015.08.009

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cooperation (UNCTAD, 2014, p. 120). Besides, the imminent 17 U.N. Sustainable Development Goals (SDGs) and their 169 subgoals to be achieved over the next 15 years (UNCTAD, 2014, p. 136) are bound to generate new concepts and typologies. New actors already include private-equity, private-military and sovereign-wealth-funds firms but others may result from the previously mentioned mega agreements which are likely to generate new NGOs and other civil-society organizations linked, among other objectives, to inequality reduction and biodiversity. As for MNEs, they are evolving into integrated international production networks which will probably assume new names. In terms of relations among governments and MNEs, growing government dissatisfaction with arbitration decisions favoring these firms, on the one hand, and recent international-investment agreements that reduce the protections granted to FDI, on the other, may well result in new appellate bodies and even a FDI Ombudsman (Sauvant, 2015b, p. 50). The search for more ‘‘sustainable FDI for sustainable development’’ of host countries within mutually beneficial governance mechanisms will help generate new theories (Sauvant, 2015b, p. 35) while the rise of emerging markets’ MNEs accustomed to working closely with governments will assist developing further explanations of reciprocal and relational exchanges. In addition, new names will probably be applied to the MNE nonmarket strategies invented to deal with the fragmented political environment (Haigh & Hoffman, 2012, p. 130; Kobrin, 2015, p. 269). Since multilateralism seems no longer attainable in the foreseeable future, Kobrin (2015, p. 271) envisioned only bilateral investment treaties, business–government agreements limited to particular issues (e.g., human rights) and isolated ‘‘coalitions of the willing’’ (e.g., firms allying with competitors and NGOs) in a world where asymmetry reigns between a fairly integrated global economy and a rather fragmented international political order. If his prediction is correct, IBGR research should focus on what MNE nonmarket strategies will fit these new circumstances where the focus on sustainable development is expanding the scope of IBGR inquiry to include the fate of future societies – not just economies. Researching such weighty issues cannot simply rely on secondary data but will also require the ‘‘contextual intelligence’’ outlined by Khanna (2014) as well as new variations on the old terms of ‘‘political risk’’ and ‘‘obsolescing bargain.’’ Acknowledgements I thank Jonathan Doh (Editor-in-Chief), Mike Peng (Senior Editor), and two reviewers for most constructive comments. Karl Sauvant was also very helpful as usual. An account of the development of my interest and research in international business–government relations can be found in Boddewyn (1993). References Aharoni, Y. (2014). The multinational enterprise and the national interest. Israel: Working Paper, Tel Aviv University. Ahuja, G., & Yayavaram, S. (2011). Explaining influence rents: The case for an institutions-based view of strategy. Organization Science, 22: 1631–1652. Baron, D. P. (1995). Integrated strategy: Market and nonmarket components. California Management Review, 37: 47–65. Bartlett, C. A., & Goshal, S. (1992). Transnational management. Homewood, IL: Irwin. Bebbington, J. (2001). Sustainable development: A review of the international development business and accounting literatures. Accounting Forum, 25(2): 128–157. Behrman, J. N. (1960). Promoting free world economic development through direct investment. American Economic Review, 1: 271–281. Bhanji, Z., & Oxley, J. E. (2013). Overcoming the dual liability of foreignness and privateness in international corporate citizenship partnerships. Academy of Management Review, 29: 28–49. Boddewyn, J. J. (1988). Political aspects of MNE theory. Journal of International Business Studies, 18: 341–363.

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Please cite this article in press as: Boddewyn, J. J. International business–government relations research 1945–2015: Concepts, typologies, theories and methodologies. Journal of World Business (2015), http://dx.doi.org/10.1016/j.jwb.2015.08.009