Related Links:

Overview: Defining the Rules of the Game in Global Business Regulation

General Features of Global Business Regulation

Types of Norms for Business Regulation

Businesses Play Key Roles in Globalizing Business Regulations

Globalization Involves a Battle of Principles

Scholars John Braithwaite and Peter Drahos examine the globalization of business regulation. There are three key components for explaining globalization.

1. Principles are the abstract norms and values that give rise to objectives and goals,
2. Mechanisms are the tools that actors use to achieve their goals,
3. Actors are individuals, organizations, corporations, states, etc. that act intentionally to achieve goals and objectives.

Mechanisms Involved in the Globalization of Business Regulation

Mechanisms that globalize business regulations are the processes that increase the extent to which patterns of regulation in one part of the world are similar, or linked, to patterns of regulation in other parts of the world.

Based on interviews with 500 “key informants,” the authors identify a set of mechanisms for globalization used in business regulation. The authors point out that the mechanisms identified in their analysis were not based on abstract theory, but on patterns that were evident in the data.

Modeling

Modeling goes beyond mere imitation (which is one actor matching their actions to those of another actor). In order to truly model, actors need to understand not simply what to do, but how to do it and why. Modeling involves sharing conceptions of actions through words and images. Modeling involves learning from observation in which the critical aspects of action are captured in symbols, templates and frameworks for action.

Modeling is the most consistently important mechanism for explaining the globalization of business regulation.

Reciprocity

Reciprocity is a particularly important principle for understanding the mechanisms of globalization. Reciprocity indicates that each actor in an exchange has an interest in an action of the other. The actors “exchange” actions so that if the first actor performs a certain action, then the second actor agrees to carry out another action desired by the first actor.

There are two kinds of reciprocity:

1. Reciprocity as a legal principle. In this case, actors commit to a particular course of action. Statutes and treaties are examples of this type of reciprocity.
2. Reciprocity as cooperation. In this case, one actor helps to achieve a goal for one or both actors. Sometimes actors share common goals or interests, and sometimes the actors do not have the same goal, but the alliance benefits both actors.

Reciprocal Adjustment

Reciprocal adjustment is a situation where actors have similar interests and this leads them toward an agreement on the same rules. These similar goals and interests may lead to the creation of a new set of common rules, the harmonization of existing rules or mutual recognition.

Reciprocal adjustment is an important mechanism for explaining what happens when companies in two countries share responsibility for the negative consequences of their actions (for example, both U.S. And Canadian firms polluting the Great Lakes). In this case, both companies want to reduce pollution and they must work together to accomplish this.

When the firms from only one country are the source of the problem, contracts and non-reciprocal coordination are more likely sources of regulatory globalization.

Non-reciprocal Coordination

Non-reciprocal coordination may occur in situations where actors have different (or, perhaps, even contradictory) interests on a particular issue, but the alliance itself benefits both actors. For instance, one actor may support the position of another actor on an issue in exchange for the first actor's support on a different issue important to the second actor.

An example of non-reciprocal coordination is Australia's support of the U.S. negotiations over the trade aspects of intellectual property rights. On the face of it, this did not make sense, since the U.S. position actually went against Australia's interests. However, Australia's actions did, in fact, make sense because Australia needed U.S. support on agricultural issues.

Military Coercion

Globalization of regulation may occur through the threat or use of military force.

Up until the end of World War II, military coercion was an important force in the globalization of business regulation. Since that time, it has become much less important for explaining globalization.

Economic Coercion

Globalization of regulation may occur through the threat or use of economic sanctions.

As with military coercion, economic coercion was much more important before World War II as an explanation for business regulation globalization. Since that time, even though economic coercion is a tool available to strong actors, it is a mechanisms that is rarely used. Economic coercion may be threatened, but is used only in exceptional circumstances.

When it is used, economic coercion most often takes the form of:

• Strong states withholding aid from weaker states,
• IFIs imposing conditions on loans to weak economies,
• Insurers refusing coverage or imposing high premiums.

Systems of Reward

While coercion raises the “price” of non-compliance, systems of reward work in an opposite fashion. Globalization of regulation may occur when the reward for compliance with regulation is increased.

The authors say that, based on their research, coercive strategies to enlist compliance are both less costly and more effective than promising rewards.

Capacity Building

Actors may wish to comply with global standards, but may lack the ability to do so. In this case, globalization of regulation may provide these actors with the competence and ability to reach these standards.

Bottom Line

While all the mechanisms described above have been used to facilitate the globalization of business regulation, there is no master mechanism that can be identified to explain globalization.

Full Text Availability:

Available for purchase at

Other Keytexts from this source

Types of Norms for Business Regulation