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Scholars John Braithwaite and Peter Drahos say that while states are the most influential actors behind globalization, state power does not fully explain this influence. The states that have the most influence in different arenas of business regulation are not necessarily the most economically or militarily powerful.

State Regulation and Industry Self Regulation

With respect to international business regulation, state regulation has more often followed industry self regulation than the other way around. Before nation-states became the powerhouses they now are, various industries already had a long history of self regulation.

It was only from the mid-19^th century into the early 20^th century that state regulatory power came to prominence. However, this did not last. In the last half century, states tended to move away from directly regulating industry to regulating industry self regulation. This is described as the “regulatory state.”

Regulation does not work in only one direction, though. Industry also changes the nature and structure of state regulation. So, not only do states oversee the ways that an industry regulates itself, but industry works to change the ways that states regulate.

The degree to which business interests shape state regulation and vice versa varies greatly from industry to industry. In some arenas large corporations are the movers of states in the game of international regulation. In other arenas corporate interests play a much smaller role.

Unified State Interests

Some states, like Japan, attempt to develop a unified state approach to regulating business. Other states, like the U.S., content with a patchwork of different viewpoints, interests and ideological positions.

We might expect states with unified state policies to have a greater level of influence. However, unified state interests are not necessarily a strength. This is evident in the arena of international business regulation. For instance, Japan waits to press its position in international bargaining until it has a consensus at home (which is often very hard to reach). And, counter to what we might expect, given the size of Japan's economy, Japan's influence on business regulation is relatively minor in many industries.

The U.S., by contrast, takes a very “decentered” approach, lodging the authority to negotiate U.S. interests within particular state regulatory agencies. This authority provides the ability for different agencies to run roughshod over the positions of other agencies. Consensus among agencies is not necessary. This, combined with a high level of expertise in these separate agencies, helps create a situation in which U.S. influence in international regulatory regimes is greater than any other nation's.

Bottom Line

States are tremendously influencial in the globalization of business regulation. However, state influence is incomplete, and state power cannot well explain the level of state influence. States are only one type of player in international business regulation. Historically, state regulation often followed industry self regulation. In the latter part of the 20^th century, state influence in globalizing business regulation moved away from a model in which states tried to regulate industry directly. Rather, state influence now largely consists of overseeing industry self regulation.

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