What is the theory behind the relative bargaining power of a multinational corporation MNC )?

In this paper, we critique the literature on MNC-Host government bargaining power relationship, and propose an integrative theoretical model within the resource-based view of the firm. Recognizing that a firm's bargaining power is directly related to rent generation, we analyze how firm-specific resources provide the basis of a sustainable bargaining power for the MNC vis-a-vis the host government. Furthermore, we identify several industry and country characteristics as moderators of the relationship between MNC resources and bargaining power. In the last section of the paper, we offer directions for future research and theory development in this area. (c) 2000 Elsevier Science Inc. All rights reserved.

An important issue in international business concerns the interaction between multinational corporations (MNCs) and host governments. A host government's intervention policy imposes severe constraints on an MNC's strategies and operations within the host country. Despite this general fact, it has also been noted that the actual amount of government intervention does vary markedly from one MNC to another within the same host country or even within the same industry. For example, Poynter (1985: 53) reported that "... the amount of intervention variation within each industry type exceeds the difference between the means of each type."

A theoretical perspective explaining how firms differ in their approaches to coping with the political forces from host governments has been developed. This perspective builds on the concept of bargaining power, referring to the notion that MNCs experience varying degrees of 'host government intervention, reflecting differences in their ability to influence host governments. Accordingly, research efforts have been directed at investigating the antecedents and strategic outcomes of MNCs' bargaining power relative to host governments (e.g., Doz & Prahalad, 1980; Fagre & Wells, 1982; Gladwin & Walter, 1980a, 1980b; Kim, 1988; Lecraw, 1984; Moran, 1974; Poynter, 1982, 1985; Vernon, 1971). Notwithstanding, the empirical findings on the sources of MNC bargaining power are often inconsistent, and the theoretical views on this topic remain divergent. Given this non-cumulative nature of the literature, it is difficult for one to discern how a particular source of bargaining power affects MNCs' bargaining power.

Therefore, to achieve progress in this research area, there is a need to conduct a systematic review of the literature, critically examining the reasons for the discrepancies with a view to developing a research agenda for the future. First, we briefly describe a general model of bargaining power relationship between an MNC and a host government. Then, we critically review the underlying theoretical rationales and empirical findings regarding various sources of MNC bargaining power at the firm, industry, and country levels of analysis. Finally, we propose an integrative model, grounded in the resource-based model, to provide a framework for directing future research on this topic in new avenues.

The resource-based view places at center stage idiosyncratic, hard-to-copy resources as the drivers of firm strategy and performance. Resource-based scholars contend that firm-level factors account for a greater variance in firm performance than industry or country factors (Hansen & Wernerfelt, 1989; Rumelt, 1991), suggesting that MNC...

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