The Importance of Leverage in GlaxoSmithKline's China Engagement: A Revelatory Case Study

Abstract

This article critically examines multinational corporation (MNC)-host government relations in the People's Republic of China (PRC) through the prism of the GlaxoSmithKline (GSK) corruption scandal. The article takes the episode as a revelatory case study and analyses it with a view to uncovering further data on the imperatives that govern interactions between the PRC and MNCs. Drawing upon the theoretical framework provided by David M. Anderson's conception of leverage, the authors attempt to unite the two themes of cultural analysis and commercial analysis. By highlighting both the rising commercial risks for MNCs and considerable legal risks for Chinese and non-Chinese intermediaries working on their behalf, the case itself underlines a gulf between theoretical understanding and practical experience of engagement with China in this sphere. The authors argue that the GSK corruption case demonstrates both that MNC normative bargaining leverage (the use of standards and norms, considered legitimate by both sides, to gain advantage or protect one’s position) in the PRC is illusory and that the Chinese party-state possesses far greater negative bargaining leverage (leverage based upon the capacity to make the other side worse off) than typically assumed.