Explaining variation in institutional integration in the European Union: why firms may prefer European solutions

Abstract:

We offer a theoretical framework that sheds light on firm preferences for more co-operative structures at the European level. We argue that the magnitude of external threat to the industry, combined with the level of the industry's transaction costs, plays a crucial role in determining firms' preferences for greater integration at the European level. Firms in industries where both the level of threat from abroad and transaction costs are high are likely to favor more binding institutions at the European level. To illustrate our argument we examine the institutional choices of EU-based firms in three different industrial sectors: aerospace, pharmaceuticals, and automobiles.