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Insiders, outsiders and host country bargains

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  • Eden, Lorraine
  • Molot, Maureen Appel

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.

Suggested Citation

  • Eden, Lorraine & Molot, Maureen Appel, 2002. "Insiders, outsiders and host country bargains," Journal of International Management, Elsevier, vol. 8(4), pages 359-388.
    • Handle: RePEc:eee:intman:v:8:y:2002:i:4:p:359-388
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    5. John Dunning & Sarianna Lundan, 2008. "Institutions and the OLI paradigm of the multinational enterprise," Asia Pacific Journal of Management, Springer, vol. 25(4), pages 573-593, December.
    6. 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.
    7. Fathallah, Ramzi & Branzei, Oana & Schaan, Jean-Louis, 2018. "No place like home? How EMNCs from hyper turbulent contexts internationalize by sequentially arbitraging rents, values, and scales abroad," Journal of World Business, Elsevier, vol. 53(5), pages 620-631.
    8. Charles Stevens & Joseph Cooper, 2010. "A behavioral theory of governments’ ability to make credible commitments to firms: The case of the East Asian paradox," Asia Pacific Journal of Management, Springer, vol. 27(4), pages 587-610, December.
    9. Sofka, Wolfgang & Zimmermann, Jörg, 2005. "There's no Place Like Home: A Strategic Framework to Overcome Liability of Foreignness in the German Car Market," ZEW Discussion Papers 05-84, ZEW - Leibniz Centre for European Economic Research.
    10. 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.
    11. Sumon Kumar Bhaumik & Saul Estrin & Rajneesh Narula, 2024. "Integrating host-country political heterogeneity into MNE–state bargaining: insights from international political economy," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 55(2), pages 157-171, March.
    12. 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.
    13. Jiatao Li & Ari Van Assche & Lee Li & Gongming Qian, 2022. "Foreign direct investment along the Belt and Road: A political economy perspective," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 53(5), pages 902-919, July.
    14. 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.
    15. Andrei Panibratov & Natalia Ribberink & Anna Veselova & Konstantin Nefedov, 2018. "Entry Modes And Liability Of Foreignness Effects: Evidence From Russian Firms On The German Market," Organizations and Markets in Emerging Economies, Faculty of Economics, Vilnius University, vol. 9(1).
    16. Nathan M. Jensen, 2018. "Bargaining and the effectiveness of economic development incentives: an evaluation of the Texas chapter 313 program," Public Choice, Springer, vol. 177(1), pages 29-51, October.
    17. Lee, Seung-Hyun & Peng, Mike W. & Song, Sangcheol, 2013. "Governments, entrepreneurs, and positive externalities: A real options perspective," European Management Journal, Elsevier, vol. 31(4), pages 333-347.
    18. 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.
    19. Rodrigues, Suzana B. & Dieleman, Marleen, 2018. "The internationalization paradox: Untangling dependence in multinational state hybrids," Journal of World Business, Elsevier, vol. 53(1), pages 39-51.
    20. 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.
    21. Shuxin Zhong & Xiaoyang Zhao & Juan Song, 2023. "MNEs’ Ambidexterity Strategies and Moral Conflicts: The Case of Google in China," Journal of Business Ethics, Springer, vol. 186(4), pages 781-796, September.
    22. Charles E. Stevens & En Xie & Mike W. Peng, 2016. "Toward a legitimacy-based view of political risk: The case of Google and Yahoo in China," Strategic Management Journal, Wiley Blackwell, vol. 37(5), pages 945-963, May.
    23. Shirodkar, Vikrant & Rajwani, Tazeeb & Stadler, Christian & Hautz, Julia & Mayer, Michael C.J., 2022. "Corporate Political Activity and Firm Performance: The Moderating Effects of International and Product Diversification," Journal of International Management, Elsevier, vol. 28(4).
    24. Jane W. Lu & Hao Ma & Xuanli Xie, 2022. "Foreignness research in international business: Major streams and future directions," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 53(3), pages 449-480, April.

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