Skip to main content Accessibility help
Hostname: page-component-55597f9d44-54jdg Total loading time: 0.376 Render date: 2022-08-16T10:20:26.035Z Has data issue: true Feature Flags: { "shouldUseShareProductTool": true, "shouldUseHypothesis": true, "isUnsiloEnabled": true, "useRatesEcommerce": false, "useNewApi": true } hasContentIssue true

Mobilizing Market Power: Jurisdictional Expansion as Economic Statecraft

Published online by Cambridge University Press:  13 August 2018

Get access


States with large markets routinely compete with one another to shield domestic regulatory policies from global pressure, export their rules to other jurisdictions, and provide their firms with competitive advantages. Most arguments about market power tend to operationalize the concept in economic terms. In this paper, we argue that a state's ability to leverage or block these adjustment pressures is not only conditioned by their relative economic position but also by the political institutions that govern their markets. Specifically, we expect that where a state chooses to draw jurisdictional boundaries over markets directly shapes its global influence. When a state expands its jurisdiction, harmonizing rules across otherwise distinct subnational or national markets, for example, it can curtail a rival's authority. We test the theory by assessing how changes in internal governance within the European Union altered firm behavior in response to US extraterritorial pressure. Empirically, we examine foreign firm delisting decisions from US stock markets after the adoption of the Sarbanes–Oxley accounting legislation. The act, which included an exogenous compliance shock, follows the harmonization of stock market governance across various European jurisdictions. Econometric analysis of firm-level data illustrates that EU-based companies, which benefited from jurisdictional expansion, were substantially more likely to leave the American market and avoid adjustment pressures. Our findings contribute to debates on the role of political institutions in economic statecraft and suggest the conditions under which future regulatory conflicts will arise between status quo and rising economic powers.

Research Article
Copyright © The IO Foundation 2018 

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)


We thank Robert Keohane, Marko Klasnja, Inu Manak, Dennis Quinn, Will Winecoff, the participants at our panels at ISA 2017, IPES 2017, and the Georgetown Political Economy working group, the editors, and two extremely helpful reviewers. We especially thank Susan Chaplinsky and Latha Ramchand for sharing some of their data with us. Wharton Research Data Services (WRDS) was used in preparing the manuscript.

Editor's note: IO's conflict-of-interest policy ensures that editors do not make decisions on manuscripts written by authors at the same institution, current or former students, or current or former co-authors.


Abbott, Kenneth W., and Snidal, Duncan. 2002. Values and Interests: International Legalization in the Fight Against Corruption. The Journal of Legal Studies 31 (1):141–77.CrossRefGoogle Scholar
Abdelal, Rawi. 2007. Capital Rules: The Construction of Global Finance. Cambridge, MA: Harvard University Press.Google Scholar
Acharya, Amitav. 2011. Can Asia Lead? Power Ambitions and Global Governance in the Twenty-First Century. International Affairs 87 (4):851–69.CrossRefGoogle Scholar
Aggarwal, Vinod K. 1985. Liberal Protectionism: The International Politics of Organized Textile Trade. Los Angeles: University of California Press.Google Scholar
Andreas, Peter, and Nadelmann, Ethan. 2006. Policing the Globe: Criminalization and Crime Control in International Relations. New York: Oxford University Press.Google Scholar
Andrews, David M. 1994. Capital Mobility and State Autonomy: Toward a Structural Theory of International Monetary Relations. International Studies Quarterly 38 (2):193218.CrossRefGoogle Scholar
Arel-Bundock, Vincent. 2017. The Unintended Consequences of Bilateralism: Treaty Shopping and International Tax Policy. International Organization 71 (2):349–71.CrossRefGoogle Scholar
Baccini, Leonardo, Pinto, Pablo M., and Weymouth, Stephen. 2017. The Distributional Consequences of Preferential Trade Liberalization: Firm-Level Evidence. International Organization 71 (2):373–95.CrossRefGoogle Scholar
Bach, David. 2010. Varieties of Cooperation: The Domestic Institutional Roots of Global Governance. Review of International Studies 36 (3):561–89.CrossRefGoogle Scholar
Bach, David, and Newman, Abraham L.. 2007. The European Regulatory State and Global Public Policy: Micro-institutions, Macro-influence. Journal of European Public Policy 14 (6):827–46.CrossRefGoogle Scholar
Bach, David, and Newman, Abraham L.. 2010. Transgovernmental Networks and Domestic Policy Convergence: Evidence from Insider Trading Regulation. International Organization 64 (3):505–28.CrossRefGoogle Scholar
Bach, David, Newman, Abraham L., and Weber, Steven. 2006. The International Implications of China's Fledgling Regulatory State: From Product Maker to Rule Maker. New Political Economy 11 (4):499518.CrossRefGoogle Scholar
Baldwin, David Allen. 1985. Economic Statecraft. Princeton, NJ: Princeton University Press.Google Scholar
Benos, Evangelos, and Weisbach, Michael S.. 2004. Private Benefits and Cross-listings in the United States. Emerging Markets Review 5 (2):217–40.CrossRefGoogle Scholar
Box-Steffensmeier, Janet M., and Jones, Bradford S.. 2004. Event History Modeling: A Guide for Social Scientists. Cambridge University Press.CrossRefGoogle Scholar
Bradford, Anu. 2012. The Brussels Effect. Northerwestern University Law Review 107:168.Google Scholar
Braithwaite, John, and Drahos, Peter. 2000. Global Business Regulation. New York: Cambridge University Press.Google Scholar
Brown, Elizabeth F. 2009. The Development of International Norms for Insurance Regulation. Brooklyn Journal of International Law 34 (3):953–97.Google Scholar
Buis, Maarten L. 2010. Stata Tip 87: Interpretation of Interactions in Non-Linear Models. The Stata Journal 10 (2):305308.CrossRefGoogle Scholar
Buttarelli, Giovanni. 2016. The EU GDPR As a Clarion Call for a New Global Digital Gold Standard. International Data Privacy Law 6 (2):7778.CrossRefGoogle Scholar
Chaplinsky, Susan, and Ramchand, Latha. 2012. What Drives Delistings of Foreign Firms from US Exchanges? Journal of International Financial Markets, Institutions and Money 22 (5):1126–48.CrossRefGoogle Scholar
Coates, John C. 2007. The Goals and Promise of the Sarbanes–Oxley Act. The Journal of Economic Perspectives 21 (1):91116.CrossRefGoogle Scholar
Crasnic, Lori, Kalyanpur, Nikhil, and Newman, Abraham. 2017. Networked Liabilities: Transnational Authority in a World of Transnational Business. European Journal of International Relations 23 (4):906–29.CrossRefGoogle Scholar
Damro, Chad. 2012. Market Power Europe. Journal of European Public Policy 19 (5):682–99.CrossRefGoogle Scholar
Daugherty, Mary, and Georgieva, Dobrina. 2011. Foreign Cultures, Sarbanes–Oxley Act and Cross-Delisting. Journal of Multinational Financial Management 21 (4):208–23.CrossRefGoogle Scholar
Djankov, Simeon, La Porta, Rafael, Lopez-de-Silanes, Florencio, and Shleifer, Andrei. 2008. The Law and Economics of Self-Dealing. Journal of Financial Economics 88 (3):430–65.CrossRefGoogle Scholar
Doidge, Craig, Andrew Karolyi, G., and Stulz, Rene M.. 2010. Why Do Foreign Firms Leave US Equity Markets? The Journal of Finance 65 (4):1507–53.CrossRefGoogle Scholar
Drezner, Daniel W. 2001. Globalization and Policy Convergence. International Studies Review 3 (1):5378.CrossRefGoogle Scholar
Drezner, Daniel W. 2007. All Politics Is Global: Explaining International Regulatory Regimes. Princeton, NJ: Princeton University Press.Google Scholar
Efrat, Asif. 2012. Governing Guns, Preventing Plunder: International Cooperation Against Illicit Trade. New York: Oxford University Press.CrossRefGoogle Scholar
Enriques, Luca, and Gatti, Matteo. 2008. Is There a Uniform EU Securities Law After the Financial Services Action Plan? Stanford Journal of Law, Business and Finance 14 (1):4382.Google Scholar
Farrell, Henry, and Newman, Abraham L.. 2010. Making Global Markets: Historical Institutionalism in International Political Economy. Review of International Political Economy 17 (4):609–38.CrossRefGoogle Scholar
Farrell, Henry, and Newman, Abraham L.. 2014. Domestic Institutions Beyond the Nation-State: Charting the New Interdependence Approach. World Politics 66 (2):331–63.CrossRefGoogle Scholar
Frieden, Jeffry A. 1991. Invested Interests: The Politics of National Economic Policies in a World of Global Finance. International Organization 45 (4):425–51.CrossRefGoogle Scholar
Griffin, Joseph P. 1999. Extraterritoriality in US and EU Antitrust Enforcement. Antitrust Law Journal 67 (1):159–99.Google Scholar
Gruber, Lloyd. 2000. Ruling the World: Power Politics and the Rise of Supranational Institutions. Princeton, NJ: Princeton University Press.CrossRefGoogle Scholar
Hall, Peter, and Soskice, David. 2001. Varieties of Capitalism: The Institutional Foundations of Comparative Advantage. Oxford, UK: Oxford University Press.CrossRefGoogle Scholar
Hancké, Bob, Rhodes, Martin, and Thatcher, Mark. 2007. Beyond Varieties of Capitalism: Conflict, Contradictions, and Complementarities in the European Economy. Oxford, UK: Oxford University Press.CrossRefGoogle Scholar
Hirschman, Albert O. 1970. Exit, Voice, and Loyalty: Responses to Decline in Firms, Organizations, and States. Cambridge, MA: Harvard University Press.Google Scholar
Hirschman, Albert O. 1980. National Power and the Structure of Foreign Trade. Berkeley: University of California Press.Google Scholar
Hooghe, Liesbet, and Marks, Gary. 2003. Unraveling the Central State, but How? Types of Multi-level Governance. American Political Science Review 97 (2):233–43.Google Scholar
Iliev, Peter. 2010. The Effect of SOX Section 404: Costs, Earnings Quality, and Stock Prices. The Journal of Finance 65 (3):1163–96.CrossRefGoogle Scholar
James, Scott C., and Lake, David A.. 1989. The Second Face of Hegemony: Britain's Repeal of the Corn Laws and the American Walker Tariff of 1846. International Organization 43 (1):129.CrossRefGoogle Scholar
Jensen, Nathan M. 2008. Nation-States and the Multinational Corporation: A Political Economy of Foreign Direct Investment. Princeton, NJ: Princeton University Press.Google Scholar
Jensen, J. Bradford, Quinn, Dennis P., and Weymouth, Stephen. 2015. The Influence of Firm Global Supply Chains and Foreign Currency Undervaluations on US Trade Disputes. International Organization 69 (4):913–47.CrossRefGoogle Scholar
Kahler, Miles. 2013. Rising Powers and Global Governance: Negotiating Change in a Resilient Status Quo. International Affairs 89 (3):711–29.CrossRefGoogle Scholar
Kaczmarek, Sarah C., and Newman, Abraham L.. 2011. The Long Arm of the Law: Extraterritoriality and the National Implementation of Foreign Bribery Legislation. International Organization 65 (4):745–70.CrossRefGoogle Scholar
Kalyanpur, Nikhil. 2018. Hegemony, Inequality, and the Quest for Primacy. Journal of Global Security Studies 3 (3):371–84.CrossRefGoogle Scholar
Kalyanpur, Nikhil, and Newman, Abraham. Forthcoming. The MNC-Coalition Paradox: Issue Salience, Foreign Firms, and the General Data Protection Regulation. JCMS: Journal of Common Market Studies.Google Scholar
Karolyi, G. Andrew. 2012. Corporate Governance, Agency Problems and International Cross-Listings: A Defense of the Bonding Hypothesis. Emerging Markets Review 13 (4):516–47.CrossRefGoogle Scholar
Kelemen, R. Daniel. 2010. Globalizing European Union Environmental Policy. Journal of European Public Policy 17 (3):335–49.CrossRefGoogle Scholar
Kim, In Song. 2017. Political Cleavages within Industry: Firm-Level Lobbying for Trade Liberalization. American Political Science Review 111 (1):120.CrossRefGoogle Scholar
Koehler, Mike. 2010. The Façade of FCPA Enforcement. Georgetown Journal of International Law 41 (4):9071010.Google Scholar
Kohli, Atul. 2006. Politics of Economic Growth in India, 1980–2005. Part II: The 1990s and Beyond. Economic and Political Weekly 41 (14):1361–70.Google Scholar
Konings, Martijn. 2011. The Development of American Finance. New York: Cambridge University Press.CrossRefGoogle Scholar
KPMG, and Economist Intelligence Unit. 2006. Capturing Value from MiFid. Available at <>..>Google Scholar
Krishnan, Jagan, Rama, Dasaratha, and Zhang, Yinghong. 2008. Costs to Comply with SOX Section 404. Auditing: A Journal of Practice and Theory 27 (1):169–86.CrossRefGoogle Scholar
Leuz, Christian, Triantis, Alexander, and Wang, Tracy Yue. 2008. Why Do Firms Go Dark? Causes and Economic Consequences of Voluntary SEC Deregistrations. Journal of Accounting and Economics 45 (2):181208.CrossRefGoogle Scholar
Licht, Amir N. 2003. Cross-Listing and Corporate Governance: Bonding or Avoiding. Chicago Journal of International Law 4 (1):141–63.Google Scholar
Lindblom, Charles E. 1982. Politics and Markets. Ethics 92 (4):720–32.Google Scholar
McGillivray, Fiona, and Stam, Allan C.. 2004. Political Institutions, Coercive Diplomacy, and the Duration of Economic Sanctions. Journal of Conflict Resolution 48 (2):154–72.CrossRefGoogle Scholar
Ming, Shang. 2009. Antitrust in China: A Constantly Evolving Subject. Competition Law International 5:411.Google Scholar
Moloney, Niamh. 2004. Time to Take Stock on the Markets: The Financial Services Action Plan Concludes as the Company Law Action Plan Rolls Out. The International and Comparative Law Quarterly 53 (4):9991012.CrossRefGoogle Scholar
Morse, Julia C., and Keohane, Robert O.. 2014. Contested Multilateralism. The Review of International Organizations 9 (4):385412.CrossRefGoogle Scholar
Mosley, Layna, and Uno, Saika. 2007. Racing to the Bottom or Climbing to the Top? Economic Globalization and Collective Labor Rights. Comparative Political Studies 40 (8):923–48.CrossRefGoogle Scholar
Mügge, Daniel. 2014. Europe and the Governance of Global Finance. Oxford, UK: Oxford University Press, USA.CrossRefGoogle Scholar
Newman, Abraham. 2008. Protectors of Privacy: Regulating Personal Data in the Global Economy. Ithaca, NY: Cornell University Press.Google Scholar
Newman, Abraham L., and Posner, Elliot. 2011. International Interdependence and Regulatory Power: Authority, Mobility, and Markets. European Journal of International Relations 17 (4):589610.CrossRefGoogle Scholar
Oatley, Thomas, and Nabors, Robert. 1998. Redistributive Cooperation: Market Failure, Wealth Transfers, and the Basle Accord. International Organization 52 (1):3554.CrossRefGoogle Scholar
Panagariya, Arvind. 2008. India: The Emerging Giant. New York: Oxford University Press.Google Scholar
Pinto, Pablo M. 2013. Partisan Investment in the Global Economy: Why the Left Loves Foreign Direct Investment and FDI Loves the Left. New York: Cambridge University Press.CrossRefGoogle Scholar
Posner, Elliot. 2009a. Making Rules for Global Finance: Transatlantic Regulatory Cooperation at the Turn of the Millennium. International Organization 63 (4):665–99.CrossRefGoogle Scholar
Posner, Elliot. 2009b. The Origins of Europe's New Stock Markets. Cambridge, MA: Harvard University Press.Google Scholar
Posner, Elliot. 2010. Sequence as Explanation: The International Politics of Accounting Standards. Review of International Political Economy 17 (4):639–64.CrossRefGoogle Scholar
Pour, Eilnaz Kashefi, and Lasfer, Meziane. 2013. Why Do Companies Delist Voluntarily from the Stock Market? Journal of Banking and Finance 37 (12):4850–60.CrossRefGoogle Scholar
Prakash, Aseem, and Kollman, Kelly L.. 2003. Biopolitics in the EU and the US: A Race to the Bottom or Convergence to the Top? International Studies Quarterly 47 (4):617–41.CrossRefGoogle Scholar
Prakash, Aseem, and Potoski, Matthew. 2006. Racing to the Bottom? Trade, Environmental Governance, and ISO 14001. American Journal of Political Science 50 (2):350–64.CrossRefGoogle Scholar
Putnam, Tonya L. 2016. Courts Without Borders: Law, Politics, and US Extraterritoriality. New York: Cambridge University Press.Google Scholar
Quaglia, Lucia. 2007. The Politics of Financial Services Regulation and Supervision Reform in the European Union. European Journal of Political Research 46 (2):269–90.CrossRefGoogle Scholar
Quaglia, Lucia. 2014. The Sources of European Union Influence in International Financial Regulatory Fora. Journal of European Public Policy 21 (3):327–45.CrossRefGoogle Scholar
Raustiala, Kal. 2002. The Architecture of International Cooperation: Transgovernmental Networks and the Future of International Law. Virginia Journal of International Law 43 (1):192.Google Scholar
Raustiala, Kal. 2011. Does the Constitution Follow the Flag? The Evolution of Territoriality in American Law. New York: Oxford University Press.Google Scholar
Richards, Paul. 2003. The EU Financial Services Action Plan: A Guide. Bank of England Quarterly Bulletin. Available at <>..>Google Scholar
Ross, Gail, and Schwartzman, Joy. 2010. The Dodd-Frank Act and the Insurance Industry: Strategic Considerations of US Financial Reform. 27 September. Milliman. Available at <>..>Google Scholar
Rudra, Nita. 2008. Globalization and the Race to the Bottom in Developing Countries: Who Really Gets Hurt? New York: Cambridge University Press.CrossRefGoogle Scholar
Shambaugh, George E. 1996. Dominance, Dependence, and Political Power: Tethering Technology in the 1980s and Today. International Studies Quarterly 40 (4):559–88.Google Scholar
Simmons, Beth A. 2001. The International Politics of Harmonization: The Case of Capital Market Regulation. International Organization 55 (3):589620.CrossRefGoogle Scholar
Singer, David Andrew. 2007. Regulating Capital: Setting Standards for the International Financial System. Ithaca, NY: Cornell University Press.Google Scholar
Stone, Randall W. 2011. Controlling Institutions: International Organizations and the Global Economy. New York: Cambridge University Press.CrossRefGoogle Scholar
Strange, Susan. 1996. The Retreat of the State: The Diffusion of Power in the World Economy. Cambridge, UK: Cambridge University Press.CrossRefGoogle Scholar
Streeck, Wolfgang, and Schmitter, Philippe C.. 1991. From National Corporatism to Transnational Pluralism: Organized Interests in the Single European Market. Politics and Society 19 (2):133–64.CrossRefGoogle Scholar
Tonelson, Alan. 2002. Race to the Bottom: Why a Worldwide Worker Surplus and Uncontrolled Free Trade Are Sinking American Living Standards. New York: Basic Books.Google Scholar
Voeten, Erik. 2001. Outside Options and the Logic of Security Council Action. American Political Science Review 95 (4):845–58.CrossRefGoogle Scholar
Vogel, David. 1995. Trading Up: Consumer and Environmental Protection in a Global Economy. Cambridge, MA: Harvard University Press.Google Scholar
Vogel, David. 2012. The Politics of Precaution: Regulating Health, Safety, and Environmental Risks in Europe and the United States. Princeton, NJ: Princeton University Press.Google Scholar
Vogel, Steven Kent. 1996. Freer Markets, More Rules: Regulatory Reform in Advanced Industrial Countries. Ithaca, NY: Cornell University Press.Google Scholar
Walter, Andrew. 2010. Chinese Attitudes Towards Global Financial Regulatory Cooperation: Revisionist or Status Quo? In Global Finance in Crisis: The Politics of International Regulatory Change, edited by Helleiner, Eric, Pagliari, Stefano, and Zimmerman, Hubert, 153–69. Abingdon, UK: Routledge.Google Scholar
Weiss, David C. 2008. The Foreign Corrupt Practices Act, SEC Disgorgement of Profits, and the Evolving International Bribery Regime: Weighing Proportionality, Retribution, and Deterrence. Michigan Journal of International Law 30 (2):471514.Google Scholar
Woods, Ngaire. 2010. Global Governance After the Financial Crisis: A New Multilateralism or the Last Gasp of the Great Powers? Global Policy 1 (1):5163.CrossRefGoogle Scholar
Wright, Thomas. 2017. All Measures Short of War: The Contest for the Twenty-First Century and the Future of American Power. New Haven, CT: Yale University Press.Google Scholar
Young, Alasdair R. 2015. The European Union as a Global Regulator? Context and Comparison. Journal of European Public Policy 22 (9):1233–52.CrossRefGoogle Scholar
Zarate, Juan. 2013. Treasury's War: The Unleashing of a New Era of Financial Warfare. New York: PublicAffairs.Google Scholar
Zhu, Hong, and Small, Ken. 2007. Has Sarbanes-Oxley Led to a Chilling in the US Cross-Listing Market? The CPA Journal 77 (3):3237.Google Scholar
Cited by

Save article to Kindle

To save this article to your Kindle, first ensure is added to your Approved Personal Document E-mail List under your Personal Document Settings on the Manage Your Content and Devices page of your Amazon account. Then enter the ‘name’ part of your Kindle email address below. Find out more about saving to your Kindle.

Note you can select to save to either the or variations. ‘’ emails are free but can only be saved to your device when it is connected to wi-fi. ‘’ emails can be delivered even when you are not connected to wi-fi, but note that service fees apply.

Find out more about the Kindle Personal Document Service.

Mobilizing Market Power: Jurisdictional Expansion as Economic Statecraft
Available formats

Save article to Dropbox

To save this article to your Dropbox account, please select one or more formats and confirm that you agree to abide by our usage policies. If this is the first time you used this feature, you will be asked to authorise Cambridge Core to connect with your Dropbox account. Find out more about saving content to Dropbox.

Mobilizing Market Power: Jurisdictional Expansion as Economic Statecraft
Available formats

Save article to Google Drive

To save this article to your Google Drive account, please select one or more formats and confirm that you agree to abide by our usage policies. If this is the first time you used this feature, you will be asked to authorise Cambridge Core to connect with your Google Drive account. Find out more about saving content to Google Drive.

Mobilizing Market Power: Jurisdictional Expansion as Economic Statecraft
Available formats

Reply to: Submit a response

Please enter your response.

Your details

Please enter a valid email address.

Conflicting interests

Do you have any conflicting interests? *