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Rob van Tulder is Professor of International Business-Society Management at the Rotterdam School of Management/Erasmus University Rotterdam. He holds a PhD degree (cum laude) in social sciences from the University of Amsterdam. He has been visiting professor at a number of universities and consultant to international organisations (such as the United Nations, the International Monetary Fund and the European Union), multinational enterprises, non-governmental organisations and ministries around the world. He is co-founder of the department of Business-Society Management, one of the leading departments in the world studying and teaching about the contribution of business and society. He founded the SCOPE databank project, which in collaboration with UNCTAD compiles the listings of the world's largest multinational enterprises from developed and developing countries. Every year this list is published and referred as ‘UNCTAD/Erasmus University databank’. Dr. van Tulder is co-founder of the Expert Centre on Sustainable Business and Development Cooperation and rotating chair of the Department of Business-Society Management. Rob is presently also academic director of the Partnerships Resource Centre (http://www.partnershipsresourcecentre.org), which studies the cross-sector partnerships between firms, NGOs and government for sustainable development. The Resource Centre itself is organised as a partnership among business schools, multinational enterprises, governments and NGOs.

Over the past few decades, European multinational enterprises (MNEs) have been faced with a rapidly changing and difficult-to-predict international policy environment. Waves of privatisation, liberalisation and deregulation have alternated with periods of reregulation and institutional volatility. The proclaimed era of ‘globalisation’ turned out to be more regional than many of its protagonists anticipated (Rugman & Verbeke, 2004). Nevertheless, the ‘home advantage’ of many companies has come under increased pressure, and even their relationships with traditionally supportive, non-market domestic stakeholders such as governments, trade-unions and other non-governmental organisations (NGOs) have been affected. In addition, the ‘host advantage’ sought by European MNEs in many developing countries has also become increasingly challenged, especially by new generations of emerging market MNEs. Part of the explanation for the success of these new entrants has been their privileged relationships with non-market actors in their domestic policy environment. Five international policy changes have accompanied these developments (Fig. 1).

Purpose – This chapter investigates the effect of capital requirement regulations, both national and those issued by the Basel Committee on Banking Supervision, on banks’ interest rate margins between loans and deposits. Higher capital requirements lead to higher margins, as banks pass this additional cost to consumers.

Methodology – To estimate this effect, we use yearly data from a cross section of countries and fixed/random effects regressions. Our results exhibit a stronger statistical significance when we focus on a cross section of 20 transition economies from Central and Eastern Europe between 2000 and 2008.

Findings – Once we include institutional factors, as well as banking system and macroeconomic-related variables, we are able to explain more than 60% of the variation in interest margin across countries. We find that the banking capital to asset ratio positively and significantly impact the margin: we estimate that a 1 percentage point increase in capital requirements leads to a 20 basis point increase in the interest rate margin. The banking system liberalization index has a strong and significant impact on margin, with a higher degree of liberalization bringing about lower margins. The impact of a one-step increase (1/3 on a scale of 1 to 4) is a reduction in the margin by 1.25 percentage points. Other variables that influence the margin are real interest and inflation, both with a positive sign.

Implications/value of chapter – National banking authorities should not impose higher capital requirements than those recommended by the Basel Committee, as this would increase local borrowing costs. Romania's 15% capital requirements (vs. 10% required by Basel rules) have increased the interest rate margin by at least 1.5 percentage points.

Purpose – This chapter explores the rationale for foreign companies to have a political strategy and how these companies are politically active in a small, open and regionally integrated economy. The reasons why companies are engaged in corporate political activities are tied to the rationales for corporate political actions but are also interrelated with the question of how effective is the selected corporate political approach in the institutional environment of a host country. The approach of political corporate activities is based on the relational and transactional approaches.

Design/methodology/approach – This chapter is largely exploratory and focuses on a non-American political context. The evidence is coming from the foreign firms operating in the chemical sector of a small, open and regionally integrated economy, the Netherlands, which is part of the larger economic entity the European Union (EU). In-depth interviews were conducted with general managers of foreign-owned firms because they could provide most insight into the political strategies of their subsidiary. The data collected through the interviews were analysed using content analysis, by using four entities of analysis: analysis on words, sentences, fragments or themes.

Findings – Empirical evidence shows a strong transactional predisposition among the political activities of foreign firms as a result of the red tape bureaucratic Dutch system. On a standalone basis, the small foreign firms did not consider that they have the power to influence political decision making in any way. The majority of firms are member of an industry association. These associations interact with political decision makers in the Netherlands on behalf of these firms.

Originality/value of chapter – This chapter takes a foreign firm-specific level of analysis on corporate political strategies approach in a host institutional environment, which is generally more researched at multinational enterprises level. The Netherlands, with a small, open and regionally integrated economy, represents a totally different setting than the pluralist country, in particular the American one, and therefore, the existing American based literature on political strategies will be less representative for this corporatist country. The design choice and the effect of the approach of political strategies implemented by the foreign firms are affected by the specific host institutional environment.

Purpose – The purpose of this chapter is to provide a comprehensive review of the literature on the importance of taxes as a determinant of FDI attraction.

Approach – The chapter presents the fundamental elements of the conceptual background that explain how and under which circumstances taxation may be a significant factor underlying FDI decisions. Then it proceeds with an extensive review of the qualitative and quantitative literature on the topic. Finally, it draws several relevant conclusions on the main patterns that can be extracted from the evolution of the literature on this field.

Findings – In this chapter we arrive at three major findings concerning the effect of taxes on FDI, and we uncover one interesting puzzle worthy of further research.

First, from the literature review it becomes clear that both FDI and taxes are concepts covering heterogeneous phenomena, and therefore to compare studies, results or to make judgments on the relationship between taxes and FDI, the working definitions of FDI and taxes that are being used needs to be clearly established and understood.

Second, based on the review of the qualitative literature, it becomes clear that while taxes are an important aspect of FDI decisions among managers, they are probably not the main driver of the decision. Moreover, taxes may only play a ‘marginal’ role compared with other determinants of FDI.

Third, looking carefully at the quantitative literature as a whole, there is not a straight answer that permits to unequivocally say that lower taxes increase FDI attraction.

Finally, a puzzle emerges from the tension between what policy makers believe and what the studies show. The review in this chapter puts in evidence that while policy makers believe lowering taxes increases the attractiveness of their territories vis-à-vis FDI, the facts show that taxes appear only to play a marginal role compared with other determinants of FDI. So, why do policy makers put so much faith on tax policies as an FDI attraction tool?

Value – The value of this chapter is threefold. It presents a very complete and up to date review of the literature concerning the impact of taxation on FDI decisions, it analyses the literature's apparently disparate results and groups them into three clear emerging conclusions, and uncovers an interesting public policy puzzle.