Governments

This chapter examines the pivotal role of governments as stakeholders of multinational enterprises (MNEs) and how their policies shape international business strategies. Governments operate at multiple levels – local, regional, national, and supranational – regulating and supporting MNE activities in both home and host countries. The chapter traces the historical evolution of the MNE–government relationship, highlighting periods of minimal state intervention during globalization and the resurgence of state influence following crises such as the Global Financial Crisis, the COVID-19 pandemic, and geopolitical conflicts. It distinguishes between home-country measures, which incentivize and regulate the internationalization of domestic firms, and host-country measures, which attract, screen, or restrict foreign MNE operations. The complex policy environment compels MNEs to develop non-market strategies, including political lobbying and compliance management, to navigate varying regulatory frameworks. Overall, the chapter underscores how government actions, through regulations, subsidies, and strategic oversight, simultaneously create opportunities and constraints for MNE decision-making and competitiveness.