Debora L. Spar and David B. Yoffie
One of the central characteristics of globalization is the spread of business enterprises and business interests across international borders. Markets once considered peripheral or exotic are now often viewed as integral to a firm's success; and a global corps of businesses has replaced the once-scattered legion of expatriate firms. As corporations increasingly define their markets to encompass wide swathes of the globe, cross-border flows of capital, technology, trade and currencies have skyrocketed. Indeed, the cross-border activities of multinational firms are an integral piece-perhaps the integral piece-of globalization. They are also, in some quarters at least, highly controversial.
One of the controversies centers on the impact of global mobility. According to some scholars, the corporate scramble for ever-wider markets has a deep dark side. In addition to creating the efficiencies and scale for which globalization is frequently lauded, it may create a deleterious "race to the bottom," a downward-spiral of rivalry that works to lower standards among all affected parties. As described by its proponents, the dynamic behind these races is straightforward and compelling. As capital and corporations spread across the international economy, their constant search for competitive advantage drives down all those factors that the global players seek to minimize. Tax rates are pushed down; 1 labor rates are pushed down; health and environmental regulation are kept to a bare minimum. In the process, crucial functions of governance effectively slip from the grasp of national governments and corporations and capital markets reap what societies and workers lose. Corporate efforts to cope with globalization, in other words, deny national governments some of their own means of adjustment. As the pace of global competition accelerates, moreover, pressuring corporations to raise their margins and lower their costs of production, the search for low costs and lax regimes should get even worse. Forced to compete in an ever-tighter market, firms will have ever greater incentives to race towards whatever bottoms they can find.
But do such races actually occur? The evidence, it appears, is considerably murkier. In some cases, multinational firms have undeniably chased after lower costs and less restrictive environments; they have chosen to