International Institutions and Multinational Enterprises

International Institutions and Multinational Enterprises

Global Players – Global Markets

International Institutions and Global Governance series

Edited by John-ren Chen

This book provides rigorous analysis of the wide range of questions surrounding the role of international institutions in governing global business, especially multinational enterprises (MNEs). The analysis, both theoretical and empirical, focuses on the corporate governance of MNEs and to what extent their management takes into account the negative effects of their activities. Also discussed are: how nation states and international institutions control the activities of MNEs, and how the role and strategies of international institutions can be changed to minimise any negative effects without hampering the positive aspects and effects of MNEs.

Chapter 1: International Institutions and Corporate Governance

John-ren Chen

Subjects: economics and finance, international economics


John-ren Chen1 THE ROLE OF INTERNATIONAL INSTITUTIONS IN THE GLOBAL COMMUNITY The economics of international institutions is concerned with problems of international public goods and cross border externalities, such as how to provide international public goods, how to regulate market failures and how to regulate cross border externalities. A public good has two crucial properties, namely non-rivalry and non-excludability of its consumption. Both public goods and externalities can be limited geographically or not. Therefore there are local public goods (LPGs) as well as global public goods (GPGs). Those local public goods which are limited geographically within a country have been considered in the theory of the state since the beginning of economics as a discipline. A national government has the sovereignty to provide the national public goods and to regulate the failures of the national markets, but sovereign states have appeared incapable of providing global public goods efficiently or of regulating failures of global markets effectively without international cooperation. The main reason is the existence of both global players and conflicts of interest between the sovereign states. It is obvious that an individual sovereign state is incapable of regulating activities of global players effectively since the latter can switch their activities between different countries. Among the global players multinational enterprises (MNEs) and international non-governmental organisations (NGOs) are the most active in the modern global society. International institutions (IIs) and international organisations (IOs) have been able to provide a favourable infrastructure for international coordination and cooperation. In this chapter...

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