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Insiders, outsiders and host country bargains

Authors
Journal
Journal of International Management
1075-4253
Publisher
Elsevier
Publication Date
Volume
8
Issue
4
Identifiers
DOI: 10.1016/s1075-4253(02)00095-9
Keywords
  • Obsolescing Bargain
  • Mne–State Relations
  • Liability Of Foreignness
  • Transaction Cost Economics
  • Resource-Based View
  • Competitive Rivalry
  • Auto Industry
  • Case Study
Disciplines
  • Economics
  • Political Science

Abstract

Abstract The obsolescing bargain (OB) model analyzes bargaining between a host country (HC) government and a multinational enterprise (MNE) at time of entry and the circumstances under which the original bargain does or does not erode over time. The model has traditionally focused on the dyadic relationship between the MNE and nation state. However, if a second wave of foreign multinationals should enter the HC, the relationship is no longer dyadic but trilateral: the host government, the first mover firms and the latecomers. What happens to the original and to subsequent MNE–state bargains? We incorporate recent insights on the liability of foreignness, transaction cost economics, multimarket competition and the resource-based view (RBV) into a theoretical model of sequential entry by rival multinationals. We find that liability of foreignness, firm rivalry and governance inseparability are key factors determining winners and losers in the sequential bargains. International institutions and home country governments are external forces that can also affect bargaining outcomes. We test our model's propositions on a longitudinal case study of public policy decisions in the Canadian auto industry.

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