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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