In an era of fragmented global production and domestic decentralization, middle-income countries confront the complex challenge of industrial upgrading. While national governments remain central to industrial policy design and funding, upgrading unfolds through multi-level interactions between state and business actors across international, national, and subnational spheres. This raises a critical question: How do local political-economic coalitions between firms and governments shape the implementation of national industrial policies and leverage them for upgrading?

This paper moves beyond the predominantly national-level analysis of industrial policy, which often treats implementation as straightforward. Instead, it presents a novel theoretical framework that emphasizes how the interplay of executive leadership, business cohesion, and bureaucratic quality fundamentally shapes industrial upgrading outcomes in today’s globalized, decentralized economy. The framework is tested and refined through a longitudinal comparative study of a key technology sector industrial policy (Prosoft) in two Mexican states - Nuevo León and Puebla - from 2000 to 2015. Drawing on semi-structured interviews with key stakeholders and secondary sources, the analysis demonstrates how distinct regional state-business configurations critically influence both policy implementation and upgrading trajectories.

Market-oriented theorizing fails to capture the reality of government intervention in the global economy. Trade and investment measures by governments around the globe, designed to protect strategic industries and maintain a security of supply in the wake of a return to strategic competition, are emblematic of the need to shift our analysis of the global economy. We have labeled this phenomenon “new economic statecraft” and have invited this special issue to examine this phenomenon across countries and sectors of the global economy. Traditionally, economists have largely focused on efficiency gains and the reduction of transaction costs rather than considering the political and strategic aspects of trade and capital flows. This existing analysis fails to capture the reality that many governments are using economic levers to compete in “strategic” sectors of their economy through intervention at the border, behind the border, and beyond the border. To analyze these phenomena, this article and the associated special issue investigates five theorized drivers of state intervention in the global economy to explain when and how governments intervene in their markets. We also hope that this approach can help guide further empirical work on state-business relations and global political and economic competition.

Local content policies (LCPs) are key instruments of industrial policy used by middle-income countries (MICs) to capture segments of global value chains (GVCs). While, in principle, LCPs are very similar, in practice, they are highly diverse. What to prioritize, how to measure it, while promoting firms’ upgrade are decisions that create room for national varieties. Considering this background, we compare LCPs for the oil and gas sector in Brazil and Malaysia. Both countries have adopted different forms of LCP over time. While Brazil has adopted an inward-looking version of LCP focusing on import-substitution, job creation, and domestic production, Malaysia implemented a more outward-looking version, focusing on coownership by nationals and strategic supplier development with less emphasis on domestic production. We argue that two very diverse developmental policy paradigms embedded in each country explain these different trajectories. In Brazil, a productivist version of developmentalism focused on domestic output underplayed the importance of integrating in GVCs. In contrast, an ethnic-based version of developmentalism in Malaysia was more flexible and allowed a better integration of domestic companies in GVCs. Our analysis sheds light on the importance of the interaction between ideas, interests, and institutions, focusing on how LCPs can build internationally competitive companies.

Patterns of business opposition and support shape the pace and scope of environmental policy reforms. This article develops a theory of firm and business coalition position-taking that explains business unity and division over environmental policy. I argue that “coalition splintering”—divergent policy positions within a business coalition—is most likely when low-adjustment cost firms are under intense pro-regulatory stakeholder pressure over an environmental issue. Pro-regulatory stakeholder pressure influences firms’ genuine preferences for environmental policy when firms see environmental regulation as reputation-enhancing for their industry, and provides reputational benefits to firms willing to take a policy position in favor of regulation. However, powerful dynamics within business coalitions encourage unified opposition to environmental policy: firms want to maintain an effective business coalition and their influence within it given their engagement in multi-domain, multi-round policy processes, and can consequently be reluctant to break ranks to support environmental policy. Unified business support for environmental policy occurs when pro-regulatory stakeholder pressure and the inevitability of policy reform shift oppositional members of a business coalition to positions of strategic support. I substantiate my theoretical model using an original case study of oil and gas company position-taking on federal methane regulation in the United States.

Why do companies sometimes lobby legislators directly and sometimes act predominantly through business associations? Although economic factors, such as size and profitability, are well-known determinants of companies’ decision to lobby, they alone cannot explain the choice in lobbying strategies. This paper provides an explanation for why companies sometimes choose to lobby collectively: reputation. When firms want to lobby in favor of a publicly unpopular position, channeling their efforts through business associations can help them shield themselves from reputational consequences. To test this theory, this paper provides evidence from firms’ lobbying on climate change. Combining climate-friendliness ratings of corporate lobbying with an original survey experiment, it demonstrates the existence of reputational costs from lobbying alone and shows that lobbying through business associations helps firms avoid such costs. For the study of lobbying positions, these results imply important systematic differences in the positions firms take alone and collectively.

In this paper, we examine a major transparency initiative affecting tax abatements for state and local economic development in the United States that has been plagued by noncompliance. Unlike academic studies examining government compliance with transparency rules such as Freedom of Information Act (FOIA) requests, we examine government and independent auditor responses to inquiries about information already posted, or not posted, in annual financial reports. Using a pre-registered experimental approach on cities, counties, and school districts in a single large-population state (Texas), we remind entities and their external auditors of their transparency obligations as well as our ability to check their compliance with this transparency rule and ask these entities follow-up questions about their required posts. Against expectations, we found that entities were not significantly more likely to comply with our request for information when we reminded them of their disclosure obligations and we found some evidence that nudges made entities less likely to comply. We argue these results provide novel insights into the limitations of transparency initiatives.

Bridging together the Middle-Income Trap (MIT) literature with the Global Value Chains (GVCs) approach may provide a more fine-grained understanding of the middle-income (MI) countries’ developmental dilemmas. While the former identifies the structural challenges these countries face, the latter provides analytical tools to explore how MI firms may overcome the hurdles posed by the global organization of production and trade as they strive to enter more technology- and knowledge-intensive segments of the GVCs. This paper undertakes this approach through four case studies of relevant Argentine firms pursuing upgrading in a natural resources-intensive and a classical manufacturing sector: agrobiotechnology and auto parts. Through a structured comparison, we inductively characterize three distinctive trajectories of upgrading, which we call subordinate, defiant, and path-breaking. They differ in the type of upgrading they entail, the technological and productive capacities required and the level of autonomy they grant to MI firms within the GVC. Furthermore, we identify two varying sets of factors—the organization of the GVC and the level of external support by domestic institutions—that make each trajectory more or less likely. The paper concludes by discussing the aggregate implications of each trajectory for countries seeking to break out of the MIT.

Overt political retribution, typically considered outside the bounds of American democracy, has recently risen to the surface of American political discourse. How do voters respond to elected officials wielding their powers of office for retributive purposes? In the current partisan political climate, do voters’ views of retribution depend on whether the official is a member of their party? Politicians in both parties have demonstrated willingness to threaten or pursue retaliation against corporations for using their political voice to publicly express opposition. Due to the American public’s ambivalence about the role of business in politics and the rights of corporations to political speech, the scenario of corporate political speech provides a useful case in which to test for partisan acceptance of the use of political retaliation. In an original and replication experiment, we find strong bipartisan rebuke of an elected official’s employment of “abusive legalism” in response to corporate political criticism. Strikingly, the negative consequences are greatest for an in-party official. The drop in support suffered by the official is equivalent to the effect of partisanship, such that an in-party official using their powers of office to “keep business out of politics” is viewed as unfavorably as a non-responsive out-party official.

Is trade lobbying effective and does its effectiveness vary across firms? Using requests for relief from China trade war tariffs, we demonstrate that lobbying for specific trade policies contributed to securing those exact policies, an elusive target in the long-running trade lobbying literature. We further argue that lobbying should be most impactful for big companies because policymakers prioritize jobs and growth when allocating a limited number of policy favors. In line with this, we find that lobbying for tariff reductions by large firms was hugely more effective than for small firms, though with one major exception: requests from firms that owned foreign subsidiaries in China were overwhelmingly rejected. Large firms are powerful, especially when their interests align with policymakers’ economic policy objectives.

In proposing industrial policies to promote development-enhancing upgrading, both the Middle-Income Trap (MIT) and Global Value Chain (GVC) literatures imply a “technocratic” approach that matches a given technical challenge to the right policy instrument. This paper suggests that, apart from the technical demands of the problem at-hand, it is also necessary to observe how governments at the subnational level practice path-dependent “sticky” styles of industrial policy that consistently favor some policy tools and approaches over others. Drawing upon four industry cases in the Mexican states of Jalisco (electronics, and information and communication technologies) and Querétaro (automotive and aerospace), we identify two distinct local industrial policy styles, as the former state deployed a Business-guided style while the latter relied upon a State-guided alternative. These styles, in turn, were each biased towards some forms of upgrading over others, leading to two main conclusions: first, that local policy styles must be taken into account to understand how deviations from technocratic policy selection appear. And second, that these styles can generate long-term impacts on the kinds of industrial upgrading observed.

Despite a rich literature on the determinants of democracy, the influence of one theoretically important factor has been neglected thus far. Unlike factors such as development, growth, and inequality, the concentration of economic power and its correlate, business unity, have not received systematic empirical treatment. We argue that this factor may act as a deterrent to democracy. Using a dataset covering 120 countries over 23 years, from 1988 through 2010, we find evidence for a negative effect of economic concentration on a nation’s level of democracy. We also show evidence suggesting that corporate political activity may provide a mechanism through which this negative effect is exercised. Our results point to the need to further understand the processes through which business elites undermine democracy.

Recent trade wars have confronted the trade policy literature with a major puzzle. How can we explain protectionist tendencies in the context of global economic integration? In this article, I aim to provide an answer to the question why, and under which conditions, internationally oriented companies are in favor of trade restrictions. More specially, I argue that intra-industry trade (IIT) and global value chains (GVCs) give rise to internally conflicting interests on the part of firms, generating incentives to lobby for specific, targeted measures against their closest competitors. To test whether firms’ preferences are translated into trade policies pursued by governments, I use data on trade barriers imposed by Brazil, Canada, China, the European Union, India, Japan, Russia, and the United States. I find compelling evidence that the levels of IIT and to a lesser extent trade in GVCs positively affect the decision to implement selective trade measures—such as bilateral tariffs and antidumping duties—rather than broader forms of trade protection. This result suggests that IIT and GVCs have structurally altered firms’ attitudes toward trade barriers and, consequently, the way in which countries protect their domestic markets against foreign competition.

How green are the leaders of US corporations, and are their attitudes reflected in corporate climate policy? Using data on individual contributions to green political candidates, we develop a proxy measure of the personal environmental views of directors sitting on the boards of public companies. Corporate America’s boards have become greener over time, although there remains significant variation in the number of green directors both across and within industries. Accounting for economic interests and outside pressures, firms run by green directors are more likely to make decisions that promote climate action internally—publicly reporting emissions, hiring sustainability officers, and announcing net-zero commitments—and externally, by joining pro-climate groups. The environmental beliefs of board members are robustly associated with pro-climate action, suggesting that the path to corporate sustainability runs through the boardroom.

The international investment regime provides generous protections for foreign investors against adverse legal changes in host states, and unusually strong procedural rights to enforce those protections in investor-state dispute settlement (ISDS). Scholars have observed that the regime enables corporate capital accumulation and raises the costs of climate action, potentially deterring states from adopting ambitious climate policies. Building on this literature, we locate a key source of these concerns in the asymmetric treatment of state and investor behavior in ISDS, which allows investors to depict themselves as innocent victims of “unfair” and “unforeseeable” “political” processes, despite themselves being active political players and sophisticated political risk managers—a tactic we call feigned victimization. This tactic is employed by fossil fuel companies to achieve capital accumulation and climate obstruction goals. We illustrate our argument through an empirical case study of TC Energy’s US$15 billion ISDS claim against the United States in relation to the Biden Administration’s revocation of a permit required to construct the Keystone XL oil pipeline. Our case study also illustrates a method by which states can expose feigned victimization tactics by investors and incorporate evidence of this into their legal defenses in ISDS.

The trade war with China has cost US producers and consumers hundreds of billions of dollars since 2018. Yet relatively few US businesses took action to oppose it. This study reports the results of an elite survey experiment on business political activity toward trade policy. Researchers presented business managers with information about the input costs of the new tariffs to their bottom line—information that most subjects acknowledged that they lacked—and invited them to take political action to express support or opposition to these tariffs. The results suggest that the novel information on economic costs did not significantly increase managers’ propensity to contact members of Congress, donate to political campaigns, sign petitions, or join social media groups. We also found that the firm’s political culture (liberal or conservative) did not significantly influence the effectiveness of the treatment. However, descriptive analysis showed that firm political culture was strongly related to the company’s support for the trade war, suggesting that these preexisting political beliefs were resistant to new information provided in our experiment even if that information could affect the company’s bottom line.

On 1 March 2018, President Trump declared a 25% tariff on certain steel imports by invoking Section 232 of the 1962 Trade Expansion Act. The tariff pitted two of America’s most storied and interconnected industries, steel and auto producers, against one another and made allies out of longtime bitter political opponents on Capitol Hill. Later that same year, President Trump doubled down on the steel tariff when he initiated a Section 232 investigation on auto and auto parts imports. The auto industry blasted the proposal, while steel offered its strong support. This paper examines the congressional response to President Trump’s proposed auto tariff. Specifically, we explain why 159 MCs signed a letter opposing the tariff. After controlling for other factors, such as district interests and campaign contributions, we find that ideology matters more than party affiliation on whether legislators signed the auto letter. We also find the second dimension of the DW-NOMINATE score to matter, suggesting the strong presence of intra-party cleavages. Our findings highlight the complex nature of trade policy as a domain of bipartisan agreement amidst broader political polarization and at a time when traditional party platforms on the issue are rapidly changing.

Although citizens value competitive markets and support small businesses, we observe substantial variation in market concentration. Why do politicians abstain from taking action to reduce concentration? We propose an often overlooked political benefit to concentrated markets: When concentration increases, competition is less pronounced and firms earn larger profits. These profits can be taxed for government revenue or used to reward business-friendly politicians. We expect politicians to impose more lenient competition policies toward firms that provide larger sources of revenue. Moreover, this relationship should be especially strong under authoritarian political institutions, where politicians only weakly value the free market and consumer outcomes and where institutional commitments to unbiased policies are weak. We derive our theoretical claims from a formal model. We draw on both cross-country evidence and evidence from Turkey at the firm and industry level to evaluate our claims. We find that as political institutions become less representative, firms that make higher tax payments tend to control more assets, operate in more concentrated industries, and engage in higher value M&As. Our study points to the weak provision of competition policies as a source of rent-seeking.

Whether China can avoid the middle-income trap has been the subject of extensive research. Currently classified as an upper middle-income country, China increasingly exhibits similar characteristics as countries currently experiencing the middle-income trap. However, using evidence from China’s coastal manufacturing city of Dongguan, this article shows how China’s approach to global value chain (GVC) participation created conditions for avoiding the middle-income trap: 1) agglomeration and manufacturing scale at multiple stages of production, 2) a mix of foreign and domestic enterprises, 3) participation in GVCs for multiple industries, 4) development of domestic demand, and 5) continuously reconfiguring government industrial policies. With these characteristics, China’s economy is likely to continue to grow, suggesting that GVC participation can facilitate a path around the middle-income trap.

Research shows that foreign asset expropriation narrows long-term bond spreads, resulting in lower borrowing costs. However, no empirical studies have investigated the effects of expropriation on sovereign bond ratings. Bondholders and sovereign bond issuers track ratings by credit rating agencies because they impact interest rates and capital costs. Using up to 59 developing countries from 1996 to 2016, we find that expropriation signals lower bond repayment, as asset confiscation blatantly violates international rule of law and discourages foreign direct investment (FDI) inflows, reducing bond ratings. Mediation analysis also indicates that FDI and the rule of law mediate the relationship between expropriation and bond ratings. Further, we distinguish between direct and indirect expropriation and observe that direct expropriation has a greater probability of decreasing ratings. Our research suggests that expropriation holds economic consequences for developing countries, indicating how expropriation negatively affects sovereign bond issuers in the financial and investment community.

The current conflictual dynamics underlying high-tech rivalry between China and the United States and the management of collateral damages by middle-power countries emanate from the clashes of techno-statecraft. Each country’s pursuit of technological superiority for its own prosperity, security, and prestige through deep and wide state intervention has aggravated the situation. Against this backdrop, our paper attempts to elucidate the dynamics of techno-statecraft of China, the United States, and South Korea. First, we examined the concept of techno-statecraft, which can be differentiated from that of economic statecraft, as an analytical framework of the paper. Second, we looked into China’s technological challenge as shaped by its techno-statecraft. Third, we traced the American threat perception of China’s technological rise and its techno-statecraft response. Fourth, the paper discussed the dilemmas Asian countries are currently facing and their choices through a case study of South Korea. Finally, it draws some theoretical, empirical, and policy implications.