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State-Market Relations
• Role of government in the
market
• Strategies to manage state in
business
1
Roles of Government in
the Economy
• The Framework State
– provide institutional structure,
minimalist
• The Promotional State
– Use resources to enhance certain
industries, e.g. pharmaceuticals
• The Regulatory State
– Prevent and stop abuses e.g. antitrust
laws, work safety
• The Social Service State
– Distribution of welfare
Strategy 1: Be Sensitive
– The Aggressive State
• State as customer
– Privatisation of public services e.g.
Healthcare, public transport, public
utilities
• State of regulator
– E.g. building codes, safety standard
• State as business
– SWF
• Obsolescing Bargain Model
MNE made investments and the resources are
held hostage by opportunistic host country
2
Sovereign Wealth Funds
• Why SWF?
• Should countries compete
with firms?
– Deep pockets
– Influence business
regulations
– Access to national secrets
• Intertwining of business and
politics
Strategy 2: Be Friendly
– The Partner State
• Political Bargaining Model
– Similarity of goals and relative
stakes
• Complementarity of goals
• Alternatives for both parties
– Relative resources
• Firm’s competences,
technology
• Location bound resrouces
– Relative constraints
• Constrained by other parties,
supranational agreements
3
Strategy 3: Be
Proactive – The
Manipulatable State
Chinese Government
Goals
• Reform
• Development
• Stability
4
Local authorities and
their KPIs
• From GDP to
sustainable GDP
– Sustained prosperity
– Green development
Lobbyism does not exist in
China, officially
• Education and voices
– Information about details and
available solutions
– Communication and explanation of
connections and context
– Give voice to ”silent” stakeholders
• Guanxi with key figures
• Shape public agenda but
according to official stands
• Develop arguments, nurture
grassroots and build coalitions but
according to the Party position
• Support the Party
5
Lobby work
•
•
•
•
•
Early: Start early in the policy process before anyone has a prestige investment
in it
Confidence: The policy maker must have confidence in the lobbyist.
Influence: The policy maker must have actual influence. Easy to get at
officials may not be influential. And not all politicians have power, depending
on their position. The king maker is powerful, and so can advisors.
Availability: The policy maker must be available for the meeting and
discussion.
Relevance: The policy maker must have interest and influence in the policy at
hand. Sometimes several policy makers are needed for some decisions, e.g.
culture and finance
Strategy 4: Be Aggressive
– The Insecure State
• Move out to friendlier
environments
6
Learning Points
• Symbiotic relationships between state
and business.
• There are different ways to manage the
state.
7