Even Giants Need a Club : Domestic Institutions, Market Size, and Regulatory Influence
In this paper we show that work on international market regulation has paid insufficient attention to the critical role played by domestic political and regulatory institutions. Existing literature emphasizes the role of market power, determined by market size, in analyzing international regulatory influence. While we do not contest the importance of market power, we introduce the notion of domestic regulatory capacity to capture the domestic institutional side of international market regulation that previous work has sidestepped. Domestic regulatory capacity is the missing link between latent market power vested in market size and international influence activated through regulatory institutions. The article employs the market size argument as a null hypothesis and contrasts it with a specification of market power that includes domestic regulatory capacity alongside market size. The two perspectives are evaluated in a structured, focused case comparison of international regulatory dynamics in the financial securities and personal data fields