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Insiders, outsiders and host country bargains

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  • Eden, Lorraine
  • Molot, Maureen Appel
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    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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    Bibliographic Info

    Article provided by Elsevier in its journal Journal of International Management.

    Volume (Year): 8 (2002)
    Issue (Month): 4 ()
    Pages: 359-388

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    Handle: RePEc:eee:intman:v:8:y:2002:i:4:p:359-388

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    Related research

    Keywords: Obsolescing bargain MNE-state relations Liability of foreignness Transaction cost economics Resource-based view Competitive rivalry Auto industry Case study;

    References

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    Citations

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    Cited by:
    1. Wolfgang Sofka & Joerg Zimmermann, 2005. "There is no Place Like Home: A Strategic Framework to Overcome Liability of Foreignness in the German Car Market," Industrial Organization 0512003, EconWPA.
    2. Peter Rodriguez & Donald S Siegel & Amy Hillman & Lorraine Eden, 2006. "Three lenses on the multinational enterprise: politics, corruption, and corporate social responsibility," Journal of International Business Studies, Palgrave Macmillan, vol. 37(6), pages 733-746, November.
    3. Hsieh, Linda H.Y. & Rodrigues, Suzana B. & Child, John, 2010. "Risk perception and post-formation governance in international joint ventures in Taiwan: The perspective of the foreign partner," Journal of International Management, Elsevier, vol. 16(3), pages 288-303, September.
    4. Elango, B., 2009. "Minimizing effects of 'liability of foreignness': Response strategies of foreign firms in the United States," Journal of World Business, Elsevier, vol. 44(1), pages 51-62, January.
    5. Barnard, Helena, 2008. "Uneven domestic knowledge bases and the success of foreign firms in the USA," Research Policy, Elsevier, vol. 37(10), pages 1674-1683, December.
    6. Ron Berger & Chong Choi & Jai Kim, 2011. "Responsible Leadership for Multinational Enterprises in Bottom of Pyramid Countries: The Knowledge of Local Managers," Journal of Business Ethics, Springer, vol. 101(4), pages 553-561, July.
    7. Barnard, Helena, 2010. "Overcoming the liability of foreignness without strong firm capabilities -- the value of market-based resources," Journal of International Management, Elsevier, vol. 16(2), pages 165-176, June.
    8. Boehe, Dirk Michael, 2011. "Exploiting the liability of foreignness: Why do service firms exploit foreign affiliate networks at home?," Journal of International Management, Elsevier, vol. 17(1), pages 15-29, March.
    9. Zhu, Hong & Eden, Lorraine & Miller, Stewart R. & Thomas, Douglas E. & Fields, Paige, 2012. "Host-country location decisions of early movers and latecomers: The role of local density and experiential learning," International Business Review, Elsevier, vol. 21(2), pages 145-155.

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