Host state bargaining with multinationals

Abstract

Multinational corporations (MNCs) play a critical role in distributing trillions of dollars of global foreign direct investment (FDI) and determining ‘who gets what’in the world economy (Mikler 2013; Bakir and Caliskan 2013). The managers of MNCs make the key decisions on ‘what kind of wealth is created, where and by whom it is created and on what terms’(Strange 1991, p. 241). Not surprisingly, this structural power in production leads MNCs to assume significant roles alongside nation-states in the international political economy (IPE). Developing-country states have especially been increasingly finding themselves bargaining with MNCs for new capital, new employment and new technology (Stopford and Strange 1991). In a similar vein, MNCs engage in bargaining with states to access markets and resources to gain a competitive advantage over their rivals (Boddewyn and Brewer 1994; Luo 2006). The issue of bargaining between host states and MNCs is one of the most critical areas of research in various disciplines in social sciences and has been subjected to extensive research in the international business (IB), IPE and comparative political economy (CPE) literatures. This chapter introduces some of the key bargaining models and offers a critical review. It calls for interdisciplinary, multi-level, and multi-actored analyses of the entry and post-entry bargaining processes with particular emphasis on political economic struggles and their consequences. The remainder of this chapter consists of three sections. In the next section, we introduce the insights from bargaining models presented in the IB, IPE and CPE literature. This is followed by critical discussions of some of the emerging themes in this literature. The final section summarizes the contributions and limitations of bargaining models, outlines future work and concludes.