Multinational Corporations and Governance of Political Activity

Yildirim, Aydin B. (2022). Multinational Corporations and Governance of Political Activity (WTI Working Paper 03/2022). World Trade Institute

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This article builds a conceptual framework to help explain the political behavior of multinational corporations (MNCs). I build on three streams of literature, i.e. heterogenous firms, global value chains, and governance, and provide an overarching framework to help understand firms’ political activities undertaken across value chain networks. I put forward a model that outlines MNCs’ coordination of political mobilization using their affiliates and subsidiaries in different jurisdictions and demonstrate models of governance they have at their disposal to reach political goals. I argue that the spread of global value chains allows firms to develop legal links with enterprises across borders through which they orchestrate political activity or delegate policy goals. The degree of flexibility between MNCs and associated firms determine the model of governance they undertake with corporations in their network. They engage in such costly coordination either to obtain legal standing in foreign jurisdictions or to cultivate a sort of critical mass that goes after a policy objective. I demonstrate the plausibility of my propositions with anecdotal evidence and identify future lines of research.

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