An oft-overlooked instrument of industry policy is the purchasing power of the state. States can use their purchasing power as a means to influence the activities of multinational enterprises (MNEs) and to foster innovation, technology transfer and exports. The principal means of achieving this is through the vehicle of offsets. The paper analyses the evolution of Australia's civil offsets policy from its inception in 1970 when it was first used as a tool of industry development. 'More recently, the Australian government has used its state purchasing power in the Partnerships for Development scheme, a programme designed to promote strategic alliances between MNEs and domestic firms in the information industries. These programs highlight the changing relationship between states and MNEs and demonstrate a continuing role for the state in bargaining over the conditions which shape competitive advantage in and inter-dependent global economy.
