Nation states and multinationals: common interests, conflicting interests and public policies

Abstract

Bearing in mind the growing importance of foreign direct investment (FDI) originating in the emerging economies, this paper seeks to make a contribution to the relatively neglected subject of the relationship between nation states and their outgoing multinational enterprises (MNEs), i.e. between home countries and multinationals originating within their jurisdiction. Starting from the observation that nation states and business corporations are both man-made creations which interact intensively, the paper explores their common and conflicting interests. Reviewing the ways they handle their conflicts, the paper focuses on the development of their relative bargaining power, and goes on to examine the public policy implications of cross-border transfer of value activities as well as of total corporate control, i.e. of corporate nationality change. Case studies of Israel-based multinational enterprises sold abroad are employed to illustrate the effects of such transfers and their implications for the formulation of public policy.

Keywords:

• Common interest
• multinationals
• national states
• public policy

Notes

Disclosure statement

The authors report no conflicts of interest. The authors alone are responsible for the content and writing of this article.

Notes

1 In Israel, the term usually has a positive connotation. It refers to the act of raising external capital by start-ups from venture capitalists, angels, etc. Here the term is employed in a different sense; it refers to the ability of the MNE to transfer value activities it controls from the home country to a foreign location.

2 On this point see for example, ‘Dispute Settlement Provisions in International Investment Agreements: A Large Sample Survey’, OECD Working Papers on International Investment, 2012/02, OECD Publishing.

3 Retrieved from The Marker 14.5.2012.

4 The World Investment Report of 2014 notes that cross-border mergers and acquisitions valued at $399 billion accounted for almost one third of total FDI, which reached $1230 billion in that year.

5 ‘In 2014, MNEs from developing economies alone invested $468 billion abroad, a 23 per cent increase from the previous year. Their share in global FDI reached a record 35 per cent, up from 13 per cent in 2007’ (World Investment Report, 2015).