The Political Economy of International Business Regulation

Nov 26, 2025
10 min read

Author: Nadia El-Khatib

Affiliation: Independent Researcher

Abstract

The regulation of international business has become one of the defining challenges of the twenty-first-century global economy. As multinational enterprises expand across jurisdictions, they encounter multiple systems of rules, soft-law standards, and governance expectations that shape how they produce, trade, innovate, and compete. Contrary to the view that regulation is purely technical or neutral, this article argues that international business regulation is a site of structural power, political bargaining, and institutional struggle. Using an interdisciplinary theoretical framework that integrates Bourdieu’s theory of fields and capital, world-systems theory, and institutional theory (with emphasis on institutional isomorphism), the study analyzes how political economy forces influence the formation, diffusion, and enforcement of regulatory frameworks affecting multinational enterprises.

Drawing on a qualitative narrative review of recent literature and contemporary global policy debates, the article examines regulation in areas such as global value chains, sustainability due diligence, corporate taxation, digital trade governance, and soft-law standard-setting. The analysis reveals a dynamic interplay between convergence and divergence in global regulatory architectures. While norms related to sustainability, transparency, and responsible business conduct have diffused widely, enforcement capacity and bargaining power remain uneven, reproducing core–periphery inequalities.

Multinational enterprises respond to this complexity through corporate diplomacy, lobbying, institutional adaptation, strategic compliance, and selective engagement with soft standards. States face both opportunities and constraints as they navigate global pressures, domestic economic strategies, and limited administrative capacities.

The article concludes by outlining the implications of these dynamics for businesses, governments, and scholars. It argues that international business regulation reflects the broader political economy of the global system: a hybrid, multi-level regulatory order shaped simultaneously by market power, state sovereignty, transnational networks, and struggles over legitimacy and authority.

1. Introduction

Regulation has always been central to the functioning of capitalism. Yet the globalization of production, finance, and digital activity has transformed the terrain on which regulatory decisions are made. Multinational enterprises (MNEs) today coordinate complex networks of subsidiaries, suppliers, and service providers that stretch across continents. They operate in an environment where national laws interact with global frameworks, industry standards, and voluntary codes of conduct.

In the last decade, several developments have made international business regulation a pressing global topic:

Public concern over tax avoidance by global corporations
Environmental and human rights violations in global value chains
Digital platforms raising issues of privacy, competition, and sovereignty
Pressure for corporate transparency and sustainability reporting
Increasing geopolitical competition affecting investment screening and technology flows

Governments, international organizations, civil society networks, and firms themselves now engage in an ongoing negotiation of what constitutes legitimate global business conduct. What might appear as technical discussions—such as tax base allocation, carbon disclosure rules, or digital data flows—are deeply political decisions with major implications for wealth distribution, labor conditions, market access, and national competitiveness.

This article examines these dynamics through the lens of political economy. Rather than treating regulation as static rules imposed on firms, it conceptualizes regulation as a dynamic process shaped by power, inequality, ideology, and institutional logics. The central research question is:

How do political-economic structures and power relations shape contemporary international business regulation, and what does this mean for multinational enterprises and states across different levels of the global system?

To address this question, the article constructs a theoretical framework using:

Bourdieu’s theory of fields, capital, and symbolic power
World-systems theory and core–periphery dynamics
Institutional theory and mechanisms of institutional isomorphism

This interdisciplinary approach enables a richer and more holistic interpretation of the forces shaping global regulatory architectures.

2. Theoretical Background

2.1 Political economy of regulation

Political economy emphasizes that the economy is inseparable from political power, ideological struggles, and structural inequalities. Regulation is therefore not merely a corrective mechanism for market failures; it is a product of bargaining among actors with unequal resources and influence.

In the context of international business:

States compete for investment while trying to uphold public goods
Firms lobby to shape rules, reduce constraints, and protect their interests
International organizations coordinate transnational issues
Civil society actors push for ethical, environmental, and human rights protections

This interplay creates a regulatory order that is fragmented, contested, and constantly evolving. The political economy approach seeks to understand:

Who sets the rules?
Whose interests prevail?
How do regulations reinforce or challenge global inequalities?

Regulation becomes a reflection of broader global power structures.

2.2 Bourdieu: Transnational fields and capital

Pierre Bourdieu’s conceptualization of field, capital, and habitus provides a powerful tool for analyzing how global regulatory authority is constructed. A field is a social space structured by competition, hierarchies, and shared norms. Actors accumulate different forms of capital to gain advantage.

Applying Bourdieu to global business regulation:

Economic capital:Large MNEs wield significant financial resources, enabling them to invest in compliance systems, expert consultants, and lobbying.

Social capital:Corporations maintain dense networks with policymakers, standard-setting bodies, auditors, and international organizations.

Cultural capital:Technical expertise—legal, scientific, digital, or environmental—allows actors to frame their interests as “best practice.”

Symbolic capital:Moral legitimacy, reputation, and authority allow actors to define what counts as responsible or legitimate corporate behavior.

Within the transnational regulatory field, actors with greater economic, cultural, and symbolic capital influence the direction of emerging standards. For example:

Major economies influence global tax reforms
Leading digital platforms shape debates on data governance
Large auditing firms contribute to designing ESG reporting frameworks
International organizations set norms that are widely adopted

Regulation becomes a struggle over defining the “rules of the game.”

2.3 World-systems theory: Core–periphery hierarchies

World-systems theory conceptualizes the global economy as a hierarchical system divided into:

Core economies: technologically advanced, wealthy, and politically influential
Semi-peripheral economies: industrializing and partially integrated
Peripheral economies: resource-dependent, facing structural constraints

Regulation reflects these inequalities:

Core economies often create global standards
Firms in core economies capture higher value segments of global value chains
Peripheral economies face compliance burdens without equal influence
Regulatory diffusion often reproduces global power asymmetries

For example:

Environmental and labor rules designed in high-income regions affect factories in low-income countries
Tax transparency requirements designed in advanced economies reshape financial flows through developing economies
Digital regulations in powerful economies influence global practices due to market size and technological dominance

World-systems theory helps explain why compliance costs and regulatory pressures fall unevenly across the global system.

2.4 Institutional theory and isomorphism

Institutional theory argues that organizations seek legitimacy by conforming to widely accepted rules and norms. This occurs through three isomorphic mechanisms:

Coercive isomorphism

Arises from legal mandates, regulatory pressures, and formal requirements.

Mimetic isomorphism

Occurs when firms imitate leading competitors in uncertain contexts.

Normative isomorphism

Derives from professional norms diffused through expert networks, educational systems, and industry associations.

In international business regulation:

MNEs adopt sustainability reporting standards because investors expect them
Countries emulate digital privacy frameworks developed elsewhere
Professional service firms promote standardized approaches to risk management and compliance

Isomorphism explains why global regulatory architectures show partial convergence despite diverse political systems.

3. Methodology

3.1 Research approach

This article adopts a qualitative, theory-driven narrative review. The goal is to interpret contemporary regulatory developments through an integrated political economy lens.

3.2 Data sources

Sources include:

Peer-reviewed research on global governance, business regulation, GVCs, and corporate sustainability
Books by foundational theorists (Bourdieu, Wallerstein)
Recent articles (majority from the last 5 years) on institutional pressures, digital governance, and multinational corporate behavior
Empirical studies on supply-chain due diligence, sustainability standards, and cross-border taxation

3.3 Analytical method

Three steps guide the analysis:

Mapping key regulatory arenas: taxation, sustainability, digital trade, supply chains, investment screening.
Applying theoretical insights to interpret the dynamics in each arena.
Identifying patterns of convergence, divergence, inequality, and corporate strategy.

4. Analysis

4.1 Regulatory competition and the mobility of capital

States face a tension between attracting investment and upholding public interest regulations. MNEs can shift production, intellectual property, and financial assets across borders, giving them bargaining leverage.

Key patterns:

Some countries lower tax rates or relax labor regulations to lure firms
Others use high standards as competitive advantage (e.g., safety, quality, environmental rules)
Firms use tax planning, regulatory arbitrage, and lobbying to minimize constraints

This dynamic creates a regulatory “chessboard” where states and firms simultaneously cooperate and compete.

4.2 Global value chains and regulatory fragmentation

Modern production is fragmented across nations. This creates regulatory gaps:

Environmental harm may occur in countries with weak enforcement
Labor abuses may occur in subcontracting networks outside direct corporate control
Tax revenues may decline as profits are shifted to low-tax jurisdictions

Regulatory initiatives such as supply-chain due diligence laws attempt to govern across borders. But enforcement varies widely:

Large MNEs can build complex compliance systems
Smaller suppliers, especially in peripheral economies, face cost burdens
Compliance may reinforce existing hierarchies in global value chains

Thus, regulation can both improve practices and deepen inequalities.

4.3 Rise of soft law and private authority

Soft-law mechanisms—voluntary standards, reporting frameworks, codes of conduct—are increasingly influential. They often emerge from:

Industry associations
Professional service firms
Investor coalitions
NGOs
Multi-stakeholder initiatives

Soft law is not legally binding, but:

Investors use it as a benchmark
Consumers use it to judge corporate responsibility
Regulators use it to shape future legislation

Bourdieu’s concept of symbolic authority helps explain why certain soft standards become globally dominant even without formal enforcement.

4.4 Digitalization and the political economy of data

Digital technologies have created new regulatory challenges:

Data privacy
Platform competition
Cybersecurity
Digital taxation
AI governance

Large technology firms hold tremendous economic and symbolic capital:

They possess advanced technical knowledge
They influence public opinion
They shape policy narratives

States struggle to balance innovation, national security, and consumer protection. Regulatory convergence occurs (e.g., privacy standards), but fragmentation remains due to geopolitical tensions.

4.5 Sustainability regulation and global legitimacy

Sustainability regulation—climate disclosure frameworks, carbon taxes, ESG reporting—has expanded rapidly. Drivers include:

Social pressure
Investor expectations
International environmental commitments
Reputation risks for multinational firms

Institutional isomorphism promotes convergence:

Firms imitate early adopters
Professional associations promote standardized reporting
Regulators align national rules with global frameworks

Yet enforcement remains uneven across jurisdictions, and compliance costs fall disproportionately on peripheral economies.

4.6 Corporate strategies in navigating regulation

MNEs are not passive rule-takers. They influence regulation through:

Lobbying and political engagement

MNEs lobby national governments, regional bodies, and international organizations.

Corporate diplomacy

Building relationships with stakeholders to influence narratives and perceptions.

Strategic compliance

Complying with regulations selectively, emphasizing those that enhance legitimacy while minimizing costs.

Regulatory arbitrage

Moving operations to jurisdictions with favorable rules.

Voluntary over-compliance

Going beyond legal requirements to build reputation or pre-empt stricter regulation.

MNE strategies reflect their position in the transnational regulatory field and their desire to accumulate symbolic capital.

5. Findings and Discussion

5.1 Convergence and divergence in global regulation

The global regulatory landscape is characterized by simultaneous:

Convergence

Diffusion of sustainability norms
Harmonization of financial reporting frameworks
Adoption of privacy and cybersecurity standards
Growing support for coordinated tax reforms
Increasing expectations for corporate transparency and due diligence

Divergence

Wide variation in enforcement capacity
Political resistance to global tax norms in some jurisdictions
Differing approaches to digital sovereignty
Contrasting environmental priorities
Uneven adoption of compliance systems among firms

Regulation is therefore global in aspiration but fragmented in practice.

5.2 Unequal influence in rule-setting

World-systems theory and Bourdieu’s framework reveal structural inequalities:

Core economies shape agendas in taxation, environment, and digital rules
Peripheral economies often adapt to regulations they did not help design
MNEs exert influence through lobbying, technical expertise, and symbolic authority
NGOs generate pressure but face resource constraints

The transnational regulatory field reflects broader global power hierarchies.

5.3 Regulatory burdens and opportunities

Regulation creates both challenges and opportunities:

Challenges

Compliance costs for small firms
Administrative burden for low-capacity governments
Risk of exclusion from global value chains
Strategic complexity for MNEs

Opportunities

Upgrading in value chains through higher standards
Increased investor confidence
Enhanced reputation and legitimacy
More resilient supply chains
Reduced corruption and improved institutional quality

The impact of regulation therefore depends on the resources and position of the actors involved.

5.4 Implications for multinational enterprises

MNEs must adopt sophisticated strategies that integrate:

Risk management
Regulatory monitoring
Sustainable supply-chain governance
Stakeholder engagement
Ethical and social responsibility
Digital compliance and data governance

Firms that treat regulation as a strategic asset rather than an obstacle often achieve long-term resilience and legitimacy.

5.5 Implications for governments

Governments, especially in semi-peripheral and peripheral economies, need to:

Strengthen institutions and administrative capacity
Coordinate regulatory reforms across ministries
Support SMEs in meeting global standards
Negotiate better positions in global value chains
Engage more actively in international standard-setting
Protect national policy space while integrating into global markets

Strategic regulation can lead to national upgrading when combined with industrial policy.

6. Conclusion

International business regulation is not a neutral or purely technical process. It is a terrain of political economy shaped by state strategies, corporate power, transnational networks, and structural inequalities. The integration of Bourdieu’s field theory, world-systems theory, and institutional theory reveals that:

Regulatory architectures reflect struggles for authority, legitimacy, and capital
Core economies and large firms disproportionately shape global norms
Peripheral actors bear heavier compliance costs and have limited influence
Institutional pressures promote partial convergence but cannot fully overcome political and economic divergence
MNEs act strategically—sometimes supporting, sometimes shaping, and sometimes circumventing regulation

As global challenges intensify—climate change, digital transformation, supply-chain risks—regulation will continue to expand and deepen. The future of international business will be shaped by how effectively the global community balances:

Efficiency and fairness
Innovation and accountability
Sovereignty and cooperation
Market power and social justice

Understanding the political economy of regulation is therefore essential for scholars, policymakers, and managers navigating the evolving global economy.

References

Adithi, A. (2017). Development of Institutional Theory and its Application to MNE Context: A Review of Literature. FOCUS: Journal of International Business, 4(2), 124–141.
Amer, E. (2023). Internationalization, Institutional Pressures in Foreign Markets and Environmental Performance. International Business Review, 32(5).
Bourdieu, P. & Wacquant, L. (1992). An Invitation to Reflexive Sociology. University of Chicago Press.
Bu, M., Ullah, S., Liu, X. & Shi, D. (2022). Multinational Enterprises’ Dual Agency Role: Sustainability and Institutional Context. Sustainability, 14(4).
Cerné, A. (2021). Speaking of Business Ethics: Bourdieu and Market Morality. Ethical Theory and Moral Practice, 24(5), 1031–1048.
Dimitropoulos, P. (2023). International Business Sustainability and Global Value Chains. International Business Review, 32(4).
Gereffi, G. (2018). Global Value Chains and Development. Cambridge University Press.
Gereffi, G. (2005). The Governance of Global Value Chains. Review of International Political Economy, 12(1), 78–104.
Harvey, C., Kelly, A., Morris, H. & Rowlinson, M. (2020). Bourdieu, Strategy and the Field of Power. Critical Perspectives on Accounting, 70.
Kapeller, J., Schütz, B. & Springholz, F. (2024). Corporate Power and Global Value Chains. Review of Evolutionary Political Economy, 5(2), 211–234.
Li, J., Chen, L. & Shapiro, D. (2018). Institutional Theory and MNE Corporate Social Responsibility. Business Strategy and the Environment, 27(8).
Ponte, S., Gereffi, G. & Raj-Reichert, G. (2023). Power and Inequality in Global Value Chains. Global Networks, 23(1).
Prince, D. (2024). The Impact of Multinational Corporations on Global Political and Economic Practice. Texila International Journal of Management, 10(2).
Ruggie, J. (2015). Regulating Multinationals: The UN Guiding Principles and the Role of States. M-RCBG Working Paper Series, 4.
Shen, W. (2024). Global Digital Trade Governance and Multinational Corporations. Economics, Humanities and Social Sciences, 6(3).
Wallerstein, I. (2004). World-Systems Analysis: An Introduction. Duke University Press.