~ ) Pergamon

International Business Review Vol. 6, No. 1, pp, 89-90, 1997.

Elsevier Science Ltd. Printed in Great Britain

0969-5931/97 $17.00 + 0.00

Book Review
States and Firms m Multinational Enterprises
in Institutional Competition
Sally Razeen
Routledge, London, 1995, 254pp. 40.00

States and Firms is a revised version of the author's doctoral thesis completed in 1992 at the
London School of Economics. The focus of the book is on the multinational enterprise (MNE)
from the perspective of institutional[ised] political economy. The study commences with the
initial premise that it is significant to view the MNE as a political-economic actor, as an
organization that is embedded in a series of "power relationships."
The book is organised into several cohesive sections: Political Economy and the
Multinational Enterprise; Intemationalisation of the French and German MNEs; MNEs in the
domestic structures; MNEs as political actors and so on. The author points out that the MNE lies
at the heart of an interaction between the process of inernationalisation - - the expansion of
cross-border production activities for the global market coverage - - and the structure and
workings of national political economies. Furthermore, the author, in somewhat of a contrast to
many writers who amplify foreign direct investment in terms of the criteria or the process
without adequately treating the decision maker, recognizes that "It is the MNE which engages in
foreign direct investment." Such direct investment by scores of industrial MNEs originating in
many countries adds up to a burgeoning phenomenon, namely, that over half of international
trade in manufactured goods can be considered as intrafirm commerce. While the MNE is
deeply embedded in its home country where it retains its corporate offices as well as the core of
its knowledge-creating functions (e.g. R&D), it constantly seeks new foreign investment
opportunities and forges ahead with new investment projects. The interaction between the
MNE's embeddedness in its home political economy with its governments-finance-industry
linkages and its internationalisation constitutes the central connecting cord of this volume.
The author has selected twelve of the largest European multinationals for detailed study and
interpretation within the political economy framework. Six of them are German: AEG, BASF,
Bayer, Bosch, Hoechst and Siemens. The other six are French: Acquitaine, Bull, CGE, Elf,
Rhone-Poulence, and Thompson. These MNEs are labelled by the author as "belated
inernationalisers". Even so, the corporate decisions and the far-flung activities of these firms
are important determinants in the global chemical and electronics industries. In particular, their
interaction with other important actors such as national governments, labour unions, banks,
suppliers and other stakeholders is treated as source of advantages that MNEs gain. These MNEs
internationalised their production during the 1980s. At the same time, they remained anchored in
their domestic structures of their home base where they had historically conditioned
relationships with the external actors.
To highlight a few of the author's findings: Among the twelve MNEs, the German chemical
subset led the "internationalisation of production". However, all expanded geographically in the
European Community, regarded as the home market in terms of global competition. The postwar
convergence of the French and German economies was reinforced in the 1980s; however, clear
differences emerged in their respective institutional makeup. MNEs' links with some external
actors in France were weaker and more conflict-laden than those in Germany. Relationships
with governments also differed. French senior management nurtured close links with the
governments also differed. French senior management nurtured close links with the government

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International
Business
Review
6,1

apparatus while in Germany the relationships were at arms-length. In both countries, however,
the MNEs wrested greater autonomy from their governments. In terms of relations with financial
institutions, the German MNEs gained power in their relationships with universal banks. The
political activity of these MNEs, at the EC level, also increased noticeably during the 1980s,
argues the author.
In summary, the study presents several theoretical implications of the firm-government
relationships. The bargaining power of the MNEs, the author concludes, lies in their product and
process technologies; however, the differences in the MNE domestic embeddedness is due to the
impact of the institutional setup in the home country. The book is lucidly written and concise
enough to be read and re-read in the mould of Robert Gilpin's (1986) The Political Economy of
International Relations. The book deserves shelf-space in business libraries.
S. B. Prasad

Central Michigan University

Michigan, USA