This investment is mine: Domestic state-industry relations and European Investment Screening Mechanisms

In a period of intense international technological competition, concerns about the impact of foreign investments in certain strategic sectors of the European economy have led policymakers to review European investment control and screening mechanisms. In doing so, European institutions and member states face a complex trade-off between maintaining a favourable environment for potential investors while simultaneously protecting specific sectors that they deem important for European and national security. We argue that the complex configuration of European Investment Screening Mechanisms (ISMs) in strategic sectors is decisively impacted by governance systems and interactions between states and industries at the domestic level. We identify two ideal-typical patterns of state-industry relations: a state-oriented and a market-oriented one. Drawing on these two macro-patterns of interaction, we derive three fundamental properties that shape these relationships: (1) the degree of protection by the government, (2) the degree of interpenetration between public and private sector elite networks, and (3) the status and autonomy of procurement agencies for the industry’s influence. We then hypothesize that variations in domestic state-industry dynamics have shaped different national preferences during the negotiations for the EU-level ISM framework. By tracing back the origins and the institutional form and outcome of the EU ISM regulation in terms of state-industry relations, we contribute to the international and comparative political economy literature on ISMs, and on the relationship between technological competition, political economy, and the EU’s governance of investment policy and public procurement.