This paper explores the implications of going beyond transaction cost theory's implicit focus on domestic investors to include multinational actors. As developed herein, the discriminating alignment between the level of hazards (contractual and/or political) and the mode of governance carries over. In the open-economy context, such an alignment reflects the hazards that arise from the nature of the transaction and those that arise from the nature of the political and regulatory environment.

This paper tackles the question of trade strategy and differential economic performance in Latin America, with a focus on the four countries—Argentina, Brazil, Chile, and Mexico—most important for the successful completion of a full Western Hemispheric integration scheme. The analysis distinguishes between a ‘standard’ market strategy that assigns the task of economic adjustment to market forces, and a ‘competitive’ strategy that more actively employs a range of public policies to facilitate adjustment and correct for instances of market failure. The choices of strategy are explored against the backdrop of international pressures, government business relations, and institutional reform within the state. Two main conclusions are drawn: first, the competitive strategy strongly correlates with more favorable macro- and microeconomic outcomes and, second, mediocre economic performance under a standard market strategy has undermined the spirit of collective action that will be necessary to forge ahead at the hemispheric level.

The activist foreign trade missions of the Clinton Administration are intended to open strategically important, but often difficult-to-enter, emerging markets to US foreign investment with government-to-government negotiations. Some research streams suggest that participation in a trade mission should benefit firms, while others suggest that participation should have no discernible benefit. This paper performs several event studies to analyze the stock return of a portfolio of the publicly traded firms participating in trade missions from 1993 to 1996. It finds that participants did not experience positive or significant abnormal stock returns as a result of mission participation, regardless of how the event date is defined or the data segmented.

This paper provides a model of integrated market and nonmarket strategies in the context of an industry facing regulation that differentially affects the firms in the industry. The regulation is chosen in a majority rule institution, and to affect the stringency of the regulation, the firms in the industry can take nonmarket action in the form of providing support to legislators based on how they vote. The nonmarket action is considered in the context of client and interest group politics, where the latter involves competition with an environmental interest group. An integrated strategy is composed of the firm's strategy for its market environment and its strategy for its nonmarket environment. Also the integrated strategies of the firms must constitute an equilibrium in their market competition and an equilibrium for their nonmarket competition, including that with the environmental interest group. Collective action in the form of coalition building and rent chain mobilization is also considered.

For the first time in modern history, free trade coexists with free finance. Free trade and free finance (defined as the deregulation and internationalization of banking and finance) are not mutually reinforcing, but cause a mismatch between the demand and supply of financial instruments. Investors want more marketable instruments whereas entrepreneurs want more transaction-specific instruments. This mismatch potentially hurts small firms and local interests most. What can they do about it? It depends on state institutions. The more centralized the state, the fewer opportunities available to potential losers to curb free finance. Free finance is most successful in centralized countries, where resistance to free finance is least strongly felt. This hypothesis is systematically tested on a sample of OECD countries.

This essay tests the hypotheses and claims of models of internationalization that draw on neo-classical trade theory. Using the influential Frieden-Rogowski model, it examines the responses of Iraq and Algeria to the oil price shocks of the 1980s and 1990s. The cases demonstrate that even the most basic assumptions and predictions of this economistic model are flawed. The Frieden-Rogowski model misrepresents the mechanisms through which price shocks are translated into policy, makes inaccurate predictions about how terms of trade affect policy or sectoral performance, fails to explain the duration of lags between price changes and policy changes, and neglects important differences in a variety of major outcomes. I argue that even in the very similar cases of Algeria and Iraq, policy changed not in response to domestic pressures generated from changes in relative prices, but as a result of a severe fiscal crisis that stripped both governments of their ability to protect domestic constituents from world prices.

This paper investigates the importance of variations in judicial institutions after a ‘shock’ has unraveled a regulatory status quo. State court decisions involving utility regulation are examined. Appointed state courts are generally agreed to be more independent than elected state courts. Before 1970, the primary participants in the process of utility regulation (and thus its largest beneficiaries) were the regulated firms and their commercial customers; afterwards, utility regulation increasingly accommodated consumer groups as well. Certain scholars have proposed that independent courts help keep administrative agencies from deviating from the original wishes of their political principals, and thus might be expected to slow down such changes in regulatory approach (which occurred with few alterations to the governing statutes). Other scholars have proposed instead that independent courts can decide as discretion dictates, and may thus lead such changes. The results of this analysis provide support for the latter view: controlling for other factors (such as partisan affiliation), more independent appointed courts sided more often with consumer groups while less independent elected courts sided more often with regulated firms and their large commercial customers.

Globalization is often said to lead to convergence among firm strategies. Significant differences existed in the organization of the production networks of Japanese and US firms in electronics in East Asia at the beginning of the 1990s. The sources of these differences lie in part in the relative newness of the export-orientation of Japanese companies, in weaknesses in Japanese corporate governance, in the geographical proximity of East Asian plants to Japan, and in the product mix of Japanese firms. An opening of Japanese production networks occurred in the first half of the 1990s in part in response to pressures associated with various forces of globalization, including the diffusion of capabilities, changes in technology, and the internationalization of the Japanese economy. This opening of Japanese networks caused them to converge towards their American counterparts. Partial convergence, however, coexisted with persistent diversity relative to the behavior of US networks. While nationality continued to matter, other factors affecting firms have to be incorporated into the analysis to explain the persistent diversity of firm behaviors.

The globalization of production simultaneously opens up new opportunities for firms and threatens them with intensified foreign competition. Studies of the resulting producer demands for commercial policy have not yet incorporated two recent trends: the increasing significance of the trade in services and the proliferation of international corporate alliances. With two US industries (airlines and telecommunications) as illustrative case studies, it can be seen that, to a surprising extent, even competitive global industries will seek to block foreign competitors from entering local markets via alliances. The level of political conflict in response to these alliances is related to the issue of market access at home and abroad. Market barriers abroad provide global producers with the motive for seeking contingent restrictions. Restrictions at home give domestic firms the opportunity to oppose alliances without worrying that competitors could enter the market through foreign direct investment. The model suggests some important differences in the political reactions to globalization between service and manufacturing firms.

With increasing regularity managers must address nonmarket as well as market problems. A common U.S. manifestation of this often-unwelcome reality is the abrupt emergence of a “Washington problem,” such as a piece of hostile legislation gathering momentum in the Congress. Although most business leaders today realize that doing nothing is rarely a viable response many activist nonmarket strategies are likewise problematic. For example even in the rare instances in which companies have the resources to devote to last-minute cover-the-Capitol blitzes such strategies are rarely effective and invariably wasteful. On any given issue a significant minority of legislators will oppose the lobbying manager's recommendations no matter what and a sizeable minority will favor them no matter what. Effective nonmarket strategies in contrast consist of knowing enough about governmental processes to ascertain who are the likely pivotal voters. This article presents a theory that provides a parsimonious way to think about pivotal voters in separation-of-power situations. Ultimately the theory provides guidance for the formation of more efficient and effective nonmarket strategies.

From the 1970s to the 1990s, British Telecom (BT), the main telecommunications operator in Britain, underwent a dramatic revolution. The former public administration, often considered inefficient and hardly innovative, became a private company, and now aims to become one of the most dynamic giant telecom players, delivering everything from simple voice calls to advanced eCommerce services all over the world. These changes in the market arena were accompanied by some wide changes in the nonmarket arena, i.e. the institutional and regulatory environment of the British telecom market. This case study analyzes the changes in these two arenas to understand how market and nonmarket strategies may be combined by British Telecom to generate a competitive advantage in a deregulated environment.

In 1997, President Clinton became the first President not awarded fast-track trade negotiating authority since this congressional delegation of trade policymaking authority first began in 1934. Fast-track's failure also represents a case of an unsuccessful business political strategy since business supporters of the measure were easily defeated by labor and environmental opponents, despite the many political ‘privileges’ that business possessed. This case study describes why fast-track is important to the future of US and global trade policy and examines the main reasons for its failure. In doing so, it illustrates theories of pivotal politics, the median voter, collective action, issue framing, international trade's welfare costs and benefits, and international relations that often arise in research and courses on the non-market environment of business, international trade, and international political economy.

Although the influence of economic factors has long dominated the analysis of corporate political action, the role of organizational factors is increasingly seen as important in explaining the phenomenon. Building upon a recent study (Martin 1995) that emphasizes the prominence of organizational factors in political decision-making, we revisit a previously used literature, reconceptualize the relationship between economic and organizational factors and corporate political action as one of mediation, and employ new data and methods to test this relationship. Our findings demonstrate emphatically the importance of organizational factors in understanding corporate political action.

Beginning in the early 70s, ACME, a highly innovative and successful U.S. chemical firm, began commercializing an important and versatile polymer invention. This case study chronicles the many travails faced by ACME in obtaining patent protection for its innovations in major developed economies. ACME's experiences suggest that international differences in patent regimes that stem from ideological, historical, and institutional differences are pervasive, and need to be accounted for in a company's patenting approach. International strategy in the patent area is thus inherently multi-domestic. Further, we also observe that in global industries, obtaining a modicum of exclusivity through strong patent protection in certain key markets may be adequate to preserve a firm's competitive advantage versus multinational rivals. Moreover, a firm's patent strategy seems intrinsically integrated with its continuing innovative and commercial performance.