Three Essays On Firms In International Markets

Author : Calvin Thrall
Publisher :
ISBN 13 :
Total Pages : 0 pages
Book Rating : 4.:/5 (134 download)

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Download or read book Three Essays on Firms and International Institutions written by Calvin Thrall and published by . This book was released on 2022 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: A long-underappreciated fact in the field of international political economy is that, while states are the actors who create international political institutions, it is often nonstate actors—particularly firms—who are most directly affected by them. As firms' operations have become increasingly global over the course of the last five decades, international institutions such as economic treaties have become increasingly important for firms' bottom lines. Theorizing from the corporate perspective, this project details three strategies by which firms influence and engage with international institutions: first, by lobbying for the creation of favorable institutions; second, by shifting their legal forms in order to gain access to new institutions; and third, by cooperating with international institutions to govern their own operations (when it is profitable to do so). In the first essay, I study the role of multinational firms in the development of international institutions. Over the course of the 20th century, states have developed large networks of bilateral or small-group economic treaties in several issue areas. These treaties, which are important tools of foreign economic policy, redistribute the gains and losses of globalization. Why do states sign treaties with some partners and not others? Motivated by the observation that the same pairs of states tend to sign multiple treaties within a short time period, I develop a theory of treaty regime coevolution that centers corporate demand for treaties. Firms expand into new foreign markets in search of profit, paying fixed costs to do so. However, once the initial cost is paid, these firms become the primary beneficiaries of any future treaty between home and host states. Incumbent firms therefore have incentive to lobby home state legislators and diplomats in favor of signing treaties with their host states, across several issue areas. Strong private sector demand can lead to the formation of multiple types of treaties between pairs of states, creating firm-driven interdependence across treaty networks. Using quantitative and qualitative data—including novel data from the USSR, declassified diplomatic cables, and elite interviews—I find support for my theory. The results have implications for the decline of multilateralism in foreign policy, and suggest new avenues for studying the effects of treaties. In the second essay, I study a case in which overlap between international institutions generated opportunites for corporate arbitrage. Multinational firms frequently route their foreign investments through intermediate shell companies. Increasingly, firms engage in proxy arbitration, using these shell companies to access other states' bilateral investment treaties and file investor-state disputes against their host states. I argue that proxy arbitration is actually a spillover effect of corporate tax avoidance. Firms invest abroad through intermediate shell companies to access the bilateral tax treaty network, reducing their withholding taxes. Because the tax and investment treaty networks overlap extensively, these "tax-planning" firms often gain investment treaty coverage as a side benefit, enabling them to file proxy arbitration in the event of a dispute. Using novel, fine-grained data on the ownership structures of multinational firms, I find evidence in support of the spillover effects theory. The results suggest that understanding the true effects of global governance institutions requires attention to how firms strategically change their legal forms to access or avoid them. Finally, in the third essay, I ask whether or not firms can cooperate with international institutions in a way that produces normatively positive outcomes. Multinational firms operate in multiple national jurisdictions, making them difficult for any one government to regulate. For this reason much of the regulation of multinational firms is done by the firms themselves, increasingly in conjunction with international organizations by way of public-private governance initiatives. Prior research has claimed that such initiatives are too weak to meaningfully change firms' behavior. Can public-private governance initiatives help firms self-regulate, even if they lack strong monitoring or enforcement mechanisms? I take two steps towards answering this question. First, I introduce a new measure of firms' performance on ESG (environmental, social, and governance) issues: the extent to which the firms issue public responses to claims of misconduct from civil society actors. Second, I argue that public-private governance initiatives allow firms to benefit from the legitimacy of their public partners, lowering the reputational cost of transparent response. Employing novel data on firm responses to human rights allegations from the Business and Human Rights Resource Center, I find that membership in the largest and most prominent initiative, the United Nations Global Compact, significantly increases firms' propensity to respond transparently to stakeholder allegations. These results suggest a limited but important role for public-private initiatives in global governance