EU CORPORATE STRATEGIES NEED TO BE REPLACED BY A DEAL MAKING MENTALITY

It is rare to find an EU company that is not developing a market strategy to benefit from the rapid growth of emerging markets such as Brazil, India, and China. As more and more firms copy each others' best practices, many of the remaining critical elements of the business environment are determined by the EU and third country governments. These include, among others, access to foreign markets for investments, protecting intellectual property etc. It is the EU and third  country Governments that negotiate these matters and smart businesses make sure that their governments know their needs.

Any serious basis for a deal must recognize that each major party has to be satisfied.  One thing for certain is not going to be reversed: Future deals will require the assent of Beijing, Brasilia, and New Delhi as well. Since the EU represents EU  corporate interests, amongst others in negotiations, EU corporate strategies towards global rule-making need to be revised sharply. It needs to be replaced by a deal making mentality that advances EU corporate interests, while recognizing that any deal must balance others' priorities as well. The essence of global rule making  is political, because it has important distributional implications and generates winners and losers.  To lose may mean higher production costs, steeper costs of switching to international standards, lower international competitiveness, loss of export markets, and even risk of corporate demise.  Under these conditions, technical expertise (and financial resources) are necessary but not sufficient conditions for successful involvement in global private-sector standardization.  It is timely information and effective representation of domestic interest that confer the critical advantage in these regulatory processes, determining who wins or loses.Such representation occurs not through state or government intervention, as in traditional intergovernmental organizations, but through domestic private-sector standard-setters.  

Firms operating in a domestic system characterized by organizational hierarchy and coordination have a crucial advantage because their system fits more naturally with the global rule making.  Such a domestic system enables a country’s stakeholders to speak with a single voice and in a timely fashion on the global stage.  There is a high institutional complementarity between the domestic and global levels.  High institutional complementarity implies that the interaction between domestic and global institutions is smooth and easy, yielding decisive strategic benefits to the firms in terms of effective interest representation in global rule-making and timely information.   By contrast, firms in a fragmented domestic system, characterized by contestation among rival standard-setters are at a distinct disadvantage.  Their system fits relatively poorly with the global rule making system , rendering both effective national interest representation and domestic diffusion of information about new global standards projects more difficult.  This is a case of low institutional complementarity between the domestic and global levels.

With widespread operations in emerging markets — and the understanding that arises from that focus — EU firms are well placed to play very constructive roles in preserving and extending a world economy open to international commerce.