Multinational Enterprises and the Global Political Economy Program

Overview

The Program on Multinational Enterprises and the Global Political Economy sponsors research and public outreach programs on the study of multinational corporations and their relationship with domestic governance.  This program is funded by the Weidenbaum Center on the Economy, Government and Public Policy at Washington Universty in St. Louis.

The program supports three broad research initiatives on (1) Political Risk and Development, (2) Multinationals and Domestic Society, and (3) Competition for Multinational Investment. Extensive research is conducted in each of these three broad areas of research by Washington University faculty. Academic workshops, graduate student training, as well as a variety of community outreach programs such as public policy conferences, lectures, and debates are held on an ongoing basis.

The Initiative on Political Risk and Development

Firms operating in emerging markets are exposed to tremendous risk from both economic and political sources. On the political side, governments can expropriate assets, renege on tax agreements, restrict capital flows, and fail to enforce contracts, or engage in other activities that negatively affect multinational's assets or income streams. Countries that can reduce political risks for multinationals attract higher levels of multinational investments.

Most political risks today do not change ownership dramatically from foreign firms to host governments. Instead, they comprise policy changes that affect operations of a multinational firm. These changes in the policy environment that adversely affect multinationals are commonly referred to as creeping expropriation. Governments today seldom directly nationalize industries, but often they make attempts to wrestle control or capture income streams from the corporation. Part of this creeping expropriation includes the difficulty of specifying complete contracts. In technology joint ventures, for example, multinationals remain wary of how technological leakages or inadequate enforcement of property rights could threaten an investment. These contracts, even if they are fully enforced, prove difficult to specify given the complexity of writing a contract about assets that have yet to be created and the uncertainty of technological innovation's pace and scope. Not only do multinationals have to predict contract enforcement, but also resolution of disputes over the unspecified elements of the contract itself.

The Political Risk Initiative supports research that explores the policies and institutions that reduce political risks for multinationals. This research can inform business investment decisions, and provide guidance to emerging market countries on how to attract foreign direct investment.

The Initiative on Multinationals and Domestic Society

The impact of multinational corporations on domestic societies remains a contentious issue. Some argue that multinationals exploit labor, pollute the environment, and capture politicians through special interest politics. Others argue that multinationals pay higher wages that other firms, transfer technology to developing countries, generate pockets of employment, and ultimately lead to economic growth.

The Initiative on Multinationals and Domestic Societies will produce non-partisan research focusing on (1) empirical research on the relationship between multinational corporations and the wages these firms pay in developing countries and (2) the role of domestic regulation in protecting both consumers and investors in emerging markets.

The Initiative on Competition for Multinational Investment

Scholars have documented recent increases in the competition for capital. In some cases this competition can facilitate positive political developments, such as fighting corruption and improving the rule of law. In other cases countries may attract investment by restricting workers rights, lowering labor standards, or otherwise providing multinationals exceptions from existing laws. This indirect impact of multinationals on domestic societies remains understudied.

This program has already sponsored research on (1) the impact of tax rates on multinational activity and (2) tax competition across countries (and the United States) to attract investment. Research papers from these two advanced research project have been presented at academic conferences and are currently under review at peer reviewed academic journals.

Sponsored Research

2012.  Jensen, Nathan M, Glen Biglaiser, Quan Li, Edmund Malesky, Pablo M. Pinto, Santiago M. Pinto and Joseph L. Staats.  Politics and Foreign Direct Investment.  University of Michigan Press.

2012.  Jensen, Nathan M.  Fiscal Policy and the Firm: Do Low Corporate Tax Rates Attract Multinational Corporations?  Comparative Political Studies.

2011.  Jensen, Nathan M. and Noel P. Johnston.  Political Risk, Reputation, and the Resource
Curse. Comparative Political Studies.

2011.  Jensen, Nathan M. and Rene Lindstaedt.  Leaning Right and Learning from the Left: Diffusion of Corporate Tax Policy across Borders.  Comparative Political Studies

2010.  Jensen, Nathan M., Quan Li, and Aminur Rahman.  Understanding Corruption Using Cross-National Firm-Level Surveys.  Journal of International Business Studies.   

2010.  Crisp, Brian, Nathan M. Jensen, Guillermo Rosas, and Thomas Zeitzoff. Vote-seeking incentives and investment environments: The need for credit claiming and the provision of protectionism.  Electoral Studies.

2008. Jensen, Nathan M.  Political Regimes and Political Risk: Democratic Institutions and
Expropriation Risk for Multinational Investors.  Journal of Politics 70.

2008.  Jensen, Nathan M. and Daniel J. Young. A Violent Future? Political Risk Insurance Markets and Violence Forecasts. Journal of Conflict Resolution.

2007.  Jensen, Nathan M. and Guillermo Rosas.  Foreign Direct Investment and Income Inequality in Mexico, 1990-2000.  International Organization.

2006.  Jensen, Nathan M.  Nation-States and the Multinational Corporation: A Political Economy of Foreign Direct Investment.  Princeton University Press.

MNE Faculty

Weidenbaum Center Director:  Professor Steven Smith
MNE Program Director:  Professor Nathan Jensen