The Global Context: How Politics, Investment, and Institutions Impact European Businesses Javier Solana & Angel Saz-Carranza Editors The Global Context: How Politics, Investment, and Institutions Impact European Businesses Acknowledgements We are indebted to many who provided strategic, logistical, and financial support during the production process of this edited volume, and would like to extend our sincere thanks to all of them. First and foremost is the European Commission’s Jean Monnet program, whose generous support made this research and book possible. The Global Context: Secondly, this volume would not have materialized, of course, without the excellent research and writing How Politics, Investment, and Institutions Impact European Businesses contributions of its authors. We would like to thank them for their efforts, good humor, and patience through multiple rounds of editing. Copyright © 2015 ESADE Invaluable logistic and research assistance was also provided by other members of ESADEgeo, such as Irene ESADEgeo - Center for Global Economy and Geopolitics (Barcelona-Madrid) Alba, Victoria Cochrane, and Felipe Gómez-Acebo. We would like to thank Yasmina Sanz and Axel Sanz as well, Av. Pedralbes, 60-62 - 08034 Barcelona (Spain) for assisting us throughout the design process. www.esade.edu / www.esadegeo.com Finally, this book would not have been possible without the diligent and continuous work of production managers Publication Manager: Marie Vandendriessche and co-editors Marie Vandendriessche and Alison Courtney of ESADEgeo. Publication Assistant: Alison Courtney Design and Layout: www.vansterandlei.com We would also like to take this moment to thank those who have supported us throughout ESADEgeo - Center for Global Economy and Geopolitics’ five years of existence. We could not have accomplished all we have without Cover picture by: Stuart Rankin (NASA) our strong relationships with outstanding partners. Over these years, we have consolidated joint activities with The Brookings Institution, London School of Economics, Tsinghua University, and IBEI-Barcelona Institute for ISBN: 978-84-606-9362-8 International Studies, among others. DL B 20218-2015 Additionally, ESADEgeo has been able to operate due to the generosity of a number of main supporters: All rights reserved. No part of this publication may be reproduced or transmitted Fundación Repsol, Fundación La Caixa, and the Hariri Foundation. In addition, other organizations continue to in any form or by any means without permission in writing from ESADE. support us on specific projects and outputs. The European Commission support for the production of this publication does not constitute This publication in particular, and the research associated with it, was made possible thanks to the European an endorsement of the contents which reflects the views only of the authors, and the Commission Commission’s Jean Monnet program within Erasmus+. The work contained in this volume was carried out as part cannot be held responsible for any use which may be made of the information contained therein. of the broader Mainstreaming EU Knowledge in Business Studies and Strategy (MEKBiz) project. The Global Context: Table of How Politics, Investment, and Contents Institutions Impact European Businesses Introduction I - XII Angel Saz-Carranza & Marie Vandendriessche 01 | Europe’s Imperative 01 - 08 Javier Solana Part 1 Part 3 The Impact of Institutional and Political Contexts on Businesses A Deeper Look at the Institutional Environment for EU Businesses 02 | Global Risks and EU Businesses 10 - 37 08 | What is the International Rule of Law? 148 - 157 Ángel Pascual-Ramsay Ian Hurd 03 | The Importance of Political Risk for European Business 38 - 64 09 | Can Global Governance Help Us 158 - 177 Antonio Roldan & Mujtaba Rahman Navigate the 21st Century? Bruce Jones & Katherine Elgin 10 | Regulatory Agencies and Regulatory Networks 178 - 193 Part 2 in the European Union Susanna Salvador, Adrià Albareda & Angel Saz-Carranza Today’s Trends in Investment and EU Businesses 11 | A Research Approach to International 194 - 211 04 | Sovereign Wealth Funds: A Growing Financial Firepower 66 - 85 Governmental Organizations: Javier Santiso, Javier Capapé & Tomás Guerrero Examining Executive Boards and Strategy Ryan Federo & Angel Saz-Carranza 05 | The Major Role of Sovereign Investors 86 - 109 in the Global Economy: A European Perspective Diego López 06 | The Internationalization of Chinese Companies 110 - 127 Part 4 and Their Presence in Europe The Future of EU Integration Ivana Casaburi & Carles Brasó Broggi 12 | A Tale of Two Cities: 214 - 235 07 | China’s Renewed Attractiveness for European Firms 128 - 146 Ideas and Narratives to Relaunch Integration Adrián Blanco Estévez José M. de Areilza The Global Context: How Politics, Investment, and Institutions Impact European Businesses Introduction Introduction The Study of Globalization and Geopolitics at ESADE In early 2010, Javier Solana joined ESADE Business and Law School as a professor. He had just left the post he had held for a decade, as High Representative for the European Angel Saz-Carranza Union’s Common Foreign and Security Policy. Professor Solana’s contribution to the research and teaching of leadership at large was self-evident; however he added further Director value by significantly extending and strengthening ESADE’s traditional emphasis on the ESADEgeo - Center for Global Economy and Geopolitics nonmarket environment – this time, with a global perspective. A few months later, ESADE’s Center for Global Economy and Geopolitics, ESADEgeo, was Marie Vandendriessche founded, joining ESADE’s two other emblematic nonmarket institutes: the Institute for Governance and Public Management and the Institute for Social Innovation. ESADEgeo’s Researcher mission was set to “provide individuals and organizations with the necessary knowledge ESADEgeo - Center for Global Economy and Geopolitics to organize and strategize in a global world.” Chaired by Professor Solana, it brought together faculty and researchers dedicated to understanding business and its global interaction with politics. There is no such thing as isolation, or insulation, in today’s world. The forces of globalization Today, the center includes and draws on political economists such as Javier Santiso and have woven all players – be they states, citizens, businesses, international organizations, or Ángel Pascual-Ramsay; economists such as David Vegara, Xavier Mena, and Fernando others – into a superconductive network. We have all become global citizens, and global Ballabriga; management scholars Francisco Longo, Ivana Casaburi, Carlos Losada, and businesses. Given this outlook, our horizons must necessarily be global. Koldo Echebarría; political scientist Xavier Fernandez i Marin; humanities scholars such as Kyriaki Papageorgiou and David Murillo; and lawyers such as Patricia Saiz and Jaume Giné. This is especially true for Europe’s firms. The objective of this edited volume is therefore to define the global context within which European businesses operate, by examining ESADEgeo currently focuses on four main areas: Global Economy, Global Governance, in depth how global and European politics, investment flows, and institutions affect Global Risks, and Europe-China business relations. The contents of this publication these firms, and offering strategies adapted to these circumstances. In their chapters, cover these areas and are written by ESADEgeo researchers and scholars, as well as the authors answer questions such as: How do current political and institutional eminent scholars, think tank members, and consultancy experts we have invited to developments in Europe affect businesses there? How do global trends impact these firms, work with us and with whom we will continue to work and research in the future. The and is being part of the European Union a mitigating factor? How do investments flow chapters vary in their styles and perspectives, thereby reflecting, in a way, the nature across the globe, and where and how do they arrive and leave Europe? of ESADEgeo’s diverse and multidisciplinary work. More importantly, they all target European businesses among their main audience. These firms, which already operate This twelve-chapter book is built up of original and applied research on these issues, globally, will increasingly do so in the near future – it is their imperative. which was developed with the support of the European Commission, in the Jean Monnet project Mainstreaming EU Knowledge in Business Studies and Strategy (MEKBiz), hosted by ESADE Business School. MEKBiz is a multi-dimensional project which aims to Key Issues in the Study of Global Politics and Business promote discussion, research, and teaching on global and European issues. The book’s content is aligned with the four specializations of ESADEgeo, ESADE Business and Law Given the web of globalization and interdependence enveloping us all, as described at School’s Center on Global Economy and Geopolitics. the outset of this introduction, it is vital for all businesses to use a global lens. When 8 I The Global Context: How Politics, Investment, and Institutions Impact European Businesses Introduction writing from London, Brussels, or Madrid however, there is another level to include in the number of bilateral, plurilateral, and multilateral governance structures continues the analysis: Europe. to multiply. It would be naive to think that the world is moving towards a perfect global governance system; nevertheless,