Declining Risk, Liberalization, and State- Multinational Bargaining

This study examines the bargaining interaction
between host countries and multinational
corporations over the life cycle of an investment
project. During the early phase of an investment in
an underdeveloped sector, market risks are high.
Most foreign firms are reluctant to enter such an
environment without guarantees. In the cases
examined here, state protection was extended to
automobile joint ventures so as to maximize
returns. In this early phase, foreign firms were
able to negotiate more favorable terms. However,
once production developed, market risks began to
decline. Consequently, host economies became
attractive to other prospective investors and
liberalization led to the influx of new foreign
investment activity. The increase in new projects
reduced state dependence and enabled host countries
to play one MNC against another in order to increase
their bargaining power.

Autorentext

Dr. Ali M. Mizamuddin recieved his Ph.D. from Columbia
University and is currently a professor of Political Science at
the University of Illinois Springfield.

Klappentext

This study examines the bargaining interaction
between host countries and multinational
corporations over the life cycle of an investment
project. During the early phase of an investment in
an underdeveloped sector, market risks are high.
Most foreign firms are reluctant to enter such an
environment without guarantees. In the cases
examined here, state protection was extended to
automobile joint ventures so as to maximize
returns. In this early phase, foreign firms were
able to negotiate more favorable terms. However,
once production developed, market risks began to
decline. Consequently, host economies became
attractive to other prospective investors and
liberalization led to the influx of new foreign
investment activity. The increase in new projects
reduced state dependence and enabled host countries
to play one MNC against another in order to increase
their bargaining power.