Supranational governance and corporate strategy: the emerging role of the World Trade Organization

The subsidization of firms by their governments is one of the most controversial issues in international trade. As such, international disciplines on subsidy have been developed under the auspices of the World Trade Organization (WTO). However, many states continue to regard state aid as a vital and entirely legitimate form of government intervention in the economy. Indeed, they cite economic studies on spillovers, externalities and appropriability problems to make their case. Writers such as Porter, Doz and Rugman have illustrated the importance of the domestic economy to international operations. But how are WTO disciplines affecting firms? We develop a case study of the commercial rivalry between two aircraft manufacturers, Bombardier and Embraer, to demonstrate the growing importance of supranational regulation to corporate strategy.