International Regime Theory and Foreign Direct Investment


In his book, “U.S. Power and the Multinational Corporation”, Gilpin (1975) asserts that the trouble with removing the artificial line that separates the political and economic sub-systems lies in the fact that “economists do not really believe in power, [and] political scientists, for their part, do not really believe in markets”.571 Indeed, since Gilpin’s first attempt thirty years ago to establish a political economy of foreign investment, much of the writing by economists and political scientists on that subject has been “as if they were talking about entirely different sets of actors and activities”.572 The following analysis assumes the relationship between economics and politics to be a reciprocal one, and should therefore be understood as an attempt to qualify FDI governance-related suggestions made in previous normative sections in the context of international and domestic politics.


Foreign Direct Investment Multinational Corporation Issue Area Domestic Politics International Regime 
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  1. 571.
    GILPIN (1975), p. 5.Google Scholar
  2. 572.
    GILPIN (1975), p. 3, referring to SUSAN STRANGE’s “Sterling and British Policy” (1971).Google Scholar
  3. 573.
    See HASENCLEVER/ MAYER/ RITTBERGER (1997), p. 1.Google Scholar
  4. 574.
    KRASNER (1983), p. 2.Google Scholar
  5. 575.
    See HASENCLEVER/ MAYER/ RITTBERGER (1997), p. 2.Google Scholar
  6. 576.
    See HASENCLEVER/ MAYER/ RITTBERGER (1997), p. 2.Google Scholar
  7. 577.
    KEOHANE (1989), p. 4. The simplification was partly in response to various criticisms (YOUNG, 1986; HAGGARD/ SIMMONS, 1987) leveled against Krasner’s complex regime definition.Google Scholar
  8. 578.
    According to WALZ (1954), there are three distinct levels (“images”) of analysis in international relations: the international systems level (third image), which is determined by the constellation of competing states in world politics; the domestic level (second image), which focuses on the internal structures of states; and the individual level (first image), which focuses on behavioral aspects of the participating human actors. For a “second-image reversed” approach (focusing on the impact of the international system on internal structure of states) see, for example, GOUREVITCH (1978).Google Scholar
  9. 579.
    COLEMAN (1974) distinguishes between individual actors, who wish to maximize their individual interests, and corporate actors, who act on the behalf of some group or collectivity.Google Scholar
  10. 580.
    A third school of thought which emphasizes knowledge dynamics and ideas as explanatory variables will not be discussed here, as the focus of the ensuing analysis is a symbiosis of power-and interest-based theories. For further details on knowledge-based regime theories see, for example, HASENCLEVER/ MAYER/ RITTBERGER (1997), pp. 136–222.Google Scholar
  11. 581.
    A distinction can be made between “behavioral power”, i.e., the ability to get someone to do something he does not want to do, and “resource power”, i.e., the possession of certain resources that will allow someone to achieve the former outcomes (see KEOHANE/ NYE, 1998).Google Scholar
  12. 582.
    See KINDLEBERGER (1973), p. 305. However, the term “hegemonic stability” was only coined later by KEOHANE (1984) and, as HASENCLEVER/ MAYER/ RITTBERGER (1997), p. 90 point out, Kindleberger himself would have ascribed a more benevolent attitude to his “stabilizer”.Google Scholar
  13. 583.
    See OLSON (1971), p. 2. This is due to the fact that the larger the group, the smaller the benefit to its individual members. Therefore, if the individual effort does not make any noticeable difference to costs or benefits of the other, and no rewards are given for group-oriented action, members of the group will not (or only on a sub-optimal level) provide themselves with the collective good.Google Scholar
  14. 584.
    See OLSON (1971), p. 22. However, this does not mean to suggest that the absolute gains of the hegemon are smaller than those of his group members. In fact, his net gains, by definition, have to be positive.Google Scholar
  15. 585.
    See HASENCLEVER/ MAYER/ RITTBERGER (1997), p. 91, who refer to this as a “de facto taxation” of other members for the collective good provided by the hegemon.Google Scholar
  16. 586.
    See GILPIN (1975), p. 44. In his view, the transformation of the core and periphery of industrial activity is directly connected to foreign direct investment flows, which in turn are shaped by political interests and power.Google Scholar
  17. 587.
    See HASENCLEVER/ MAYER/ RITTBERGER (1997), pp. 95–102 for a discussion.Google Scholar
  18. 588.
    See HAGGARD/ SIMMONS (1987), p. 500 for a summary of empirical studies.Google Scholar
  19. 589.
    See HAGGARD/ SIMMONS (1987), p. 491.Google Scholar
  20. 590.
    See HASENCLEVER/ MAYER/ RITTBERGER (1997), pp. 92–93.Google Scholar
  21. 591.
    See KEOHANE (1984), pp. 49–51.Google Scholar
  22. 592.
    Keohane, in particular, based his theory on principles of rational choice maintaining that state actors “have consistent, ordered preferences, and that they calculate cost and benefits [...] in order to maximize their utility in view of those preferences” (KEOHANE, 1984, p. 27).Google Scholar
  23. 593.
    SCHELLING (1960), pp. 83–87 introduces the distinction between “pure” and “mixed” motives, the latter presenting a complex, non-correlated structure of preferences, amalgamating coordination opportunities with antagonistic motivations. See also AXELROD (1984).Google Scholar
  24. 594.
    See HASENCLEVER/ MAYER/ RITTBERGER (1997), p. 33.Google Scholar
  25. 595.
    See AXELROD/ KEOHANE (1986), p. 226. See also GRIECO (1988) for a realist critique of cooperation theory.Google Scholar
  26. 596.
    See HASENCLEVER/ MAYER/ RITTBERGER (1997), p. 30.Google Scholar
  27. 597.
    See KEOHANE (1984), p. 101.Google Scholar
  28. 598.
    See HASENCLEVER/ MAYER/ RITTBERGER (1997), p. 32.Google Scholar
  29. 599.
    See MILNER (1997), p. 11.Google Scholar
  30. 600.
    YOUNG (1989), p. 366.Google Scholar
  31. 601.
    See HASENCLEVER/ MAYER/ RITTBERGER (1997), pp. 72–74.Google Scholar
  32. 602.
    See YOUNG (1994), Chapter 4, for details.Google Scholar

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