Impact of MNEs on public governance institutions in areas of limited statehood

What is it about?

We explore the interaction between Multinational Enterprises (MNEs) and public governance institutions in regions of limited statehood by focusing on three areas of inquiry: firstly, the impact of MNEs in these environments; secondly, the mechanisms and levels through which MNEs engage with external governance processes; and lastly, the strategic motivation for the mode and level of engagement. We use detailed case studies of four MNEs that are active in Afghanistan. The results reveal a relationship between the depth of country embeddedness and the level of engagement of MNEs with public institutions and this is related to issues around risk mitigation and time horizons. Deeper embeddedness in the local markets brings greater exposure to risk leading to more and wider engagement in governance processes and cross sector partnerships in order to influence these concerns. Two models of MNE engagement are presented, namely an embedded versus autonomous model and we examine their implications.

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Why is it important?

In fragile and conflict-affected states, MNEs can contribute toward peace and institution building and reinforce cycles of positive development, or they can further pathological behavior and contribute to conflict. MNEs are increasingly going to be expected to step into the gaps associated with institutional voids and this will require a different approach to doing business and their choice of approach will have a direct bearing on social outcomes in host countries.