Proxies, Partners, or Opponents? Rethinking Business–Government Relations in Geoeconomic Competition

Authors: Olivier Schmitt (Royal Danish Defence College), Anna Vlasiuk Nibe (University of Southern Denmark)

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Introduction: From Liberalisation to Interventionism

Over the past decade, regulatory practices in Western economies have shifted dramatically. The optimism of market liberalisation has given way to a new era of market interventionism, as governments grapple with the security risks posed by economic interdependence. The global economic order created critical vulnerabilities, enabling competing political regimes to weaponize supply chains, financial networks, or technological infrastructures, turning commerce into a tool of coercion. This “geoeconomic turn” has sparked intense debate among scholars and policymakers. At its heart lies a pressing question: how do states and businesses interact when economic tools become instruments of national security?

In our recent article, we offer a systematic framework to answer this question. Specifically, we developed a typology of business–government relations. First, this typology provides a systematized way to think about firms, not just as market actors, but as strategic players in geoeconomic competition. Second, the typology highlights the different political goals for which governments try to co-opt companies.

The Changing Context

Two global shifts set the stage for our typology. First, the rise of “weaponized interdependence” has shown how states can exploit their control over critical nodes in global networks to gather information or choke-off trade and investment flows. This creates new forms of coercive power, which matters in the contemporary world that is transitioning from a unipolar, US-led system, to another configuration in which dominating Western norms and material infrastructures are contested by other international actors. Second, the shifting patterns of production have made services dominant in global GDP, but still deeply tied to advanced manufacturing capabilities. Digital automation and globalized supply chains further entangle states and firms, making companies central actors in strategic competition.

Together, these dynamics have reshaped the political reality within which states and firms operate. The revival of great power competition incentivizes states to interact with companies across various sectors and industries. In addition to traditional sectors such as the defence industry, agriculture, and natural resources, industries such as media, information technologies, finance and health have also acquired strategic importance because of their potential role in statecraft activities. For firms, it means they can no longer remain neutral market players but have to navigate across increasing states’ incentives to .

The Two-Scale Framework

In order to systematically explore emerging forms of interactions between states and governments in the new geoeconomic world, we propose a two-axis matrix to classify business–government relations. On one axis lies the degree of state control or influence of the state over a company’s activities. The other axis represents the degree of alignment between business and government goals. From this, four ideal types emerge: governments proxies, prospects, partners, and opponents (See Figure 1).

Figure 1. Mapping states-companies relations

X-axis: State ability to control / influence a company

Y-axis: The degree of alignment of state-firm geoeconomic objectives

Governments proxies and prospects are firms controlled by states, often state-owned enterprises or companies embedded in patronage networks. Government proxies are firms that act as direct extensions of state power, which can engage in various forms of statecraft from espionage to economic coercion. The observable implications of such relationships include preferential access to state financing, states’ support of companies’ expansion activities to create critical dependencies in target countries, and the manipulation of contractual obligations of proxy companies for the host governments’ geopolitical goals. Prospects are state-owned or state-controlled firms typically pursuing commercial purposes with a potential to be mobilized to attain geopolitical goals in the future.

Governments’ partners or opponents, in contrast, are private companies which governments try to engage for various statecraft strategies with a variety of positive incentives, including industrial policy, and negative incentives, including through changes to domestic legal frameworks, strategic corruption, and threats. Firms’ responses to such incentives depend on the one hand on the intensity of states’ efforts to influence and change firm behaviour. On the other hand it depends on firms’ understanding of their own interests, which can vary depending on market orientation, degree of access to investment finance, availability of government support via subsidizing or tax arrangement, institutional context and strategic environment, and so on. Governments’ partners are private firms whose interests fully or partially align with state goals, collaborating willingly and often benefiting economically from patriotic capitalism or strategic industrial policies. The observable implications include firm support for security-motivated market interventionist policies, direct assistance to governments in policy development or in their pursuit of various forms of statecraft, business-government contractual arrangements in strategic sectors, and so on. Finally, governments’ opponents are firms whose interests clash with government objectives. They may resist intervention, lobby against regulations, or pursue global strategies that undermine national security objectives.

This typology highlights that business–government relations are not binary but exist along a spectrum of influence, control, and interest alignment between firms and government.

A More Granular Approach to State/Companies Interactions

We conceptualise a typology of state/companies interactions, but it is important to note that categorizing a firm within one or the multiple “cells” of the model has to be determined on a case-by-case basis. Classification variation arises from the complexity, temporality, and ambiguity of the cross-national economic and political contexts within which states and firms interact. Depending on the strategic objectives states want to achieve vis-à-vis other actors, states can use different instruments as part of their statecraft repertoire, including competition, espionage, subversion, deterrence, and compellence. As described above, governments employ different strategies ranging from direct ownership to industrial policy in order to control or influence firms’ behaviour and engage them in these diverse forms of statecraft. Accordingly, each instrument of statecraft involves distinct interactions with strategically important firms, whose capabilities and resources are often indispensable to the success of national strategies. (See Table 1).

Table 1. Companies’ contribution to statecraft objectives

Competition involves states seeking wealth (increased market shares, revenues through taxation, etc.) through trade without necessarily hostile intent. Governments may support domestic firms via industrial policy or legal instruments. For example, France’s Naval Group, majority state-owned, serves both national defence and international markets (competition/control). Similarly, China’s BYD benefits from state support to expand globally (competition/influence).

Espionage entails politically sensitive intelligence-gathering, often leveraging companies’ assets. Through Section 702 of the U.S. Foreign Intelligence Surveillance Act, firms like Google are for example compelled through extraterritorial application of domestic regulation to share foreign communications with domestic intelligence agencies (espionage/influence). In contrast, China’s state-controlled Avic has been accused of cyber espionage against U.S. aerospace firms, illustrating espionage/control.

Subversion seeks to weaken or undermine target states. The discussed international context provides renewed incentives to engage in subversion through a variety of instruments, including cyber-based propaganda, strategic weaponization of key narratives, or strategic corruption. States may control media firms to spread strategic narratives, as seen with Russia’s RT (subversion/control). Influence-based subversion can involve cooperation with companies like Microsoft, which has reportedly shared the self-identified security flaws in its software with the National Security Agency (NSA), which can be used for potential cyber sabotage purposes, before they are publicly known.

Deterrence aims to prevent adversarial behaviour by punishment (the threat of unacceptable damages prevents a behaviour) or denial (the cost of a hostile action is too high or the objective is unlikely to be successful, and thus an unappealing strategy). Companies contribute mainly through deterrence by denial, for example by bolstering infrastructure security or resource stockpiles. China National Cereals, Oils and Foodstuffs Cooperation (COFCO), a massive Chinese state-owned enterprise, exemplifies deterrence/control by ensuring food security in crises. Cybersecurity firms like CrowdStrike illustrate deterrence/influence, working with governments to protect logistics networks and infrastructure from cyber threats.

Compellence imposes costs to alter adversary behaviour, often through sanctions or blockades. Companies may be required to comply with sanctions, sacrificing commercial interests. Russia’s Gazprom demonstrates compellence/control, where Russia uses its control over the firm to utilise energy supply interruptions as leverage over other states (Farrell & Newman’s “chokepoint effect”). Financial firms such as the French Société Générale illustrate compellence/influence, withdrawing from Russia under sanction regimes.

Overall, the geoeconomic environment fosters structural incentives for states to strategically engage companies across multiple domains of statecraft. These interactions blur the lines between public and private actors, elevate the strategic importance of diverse industries, and reinforce the role of economic and technological tools in managing competition that falls short of war.

Conclusion: Towards a Nuanced Debate

The geoeconomic turn has blurred the lines between commerce and security. In this environment, understanding how states and firms interact is no longer optional — it is essential. The suggested typology and a more nuanced mapping of business-governments interactions across various forms of statecraft, thus, provides a valuable framework for navigating this complexity. This framework can be applied to analyse a variety of concrete cases: European technology firms caught between the US and Chinese pressures, energy companies navigating sanctions regimes, or digital platforms facing demands for data sovereignty. The prospects for future research include studying how the mechanisms of control/influence are established, exploring in more detail firm’s engagement in statecraft across sectors, and understanding how governments and businesses negotiate these roles in a world where economics and security are inseparable.