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.