Framework

The obsolescing bargain between MNE and host state

The question it answers

When a multinational's board plans a plant or mine abroad, how will its bargaining power with the host government weaken once those fixed assets are sunk?

Origin
Vernon, 1971
Diagram type
Process by phase
Level of analysis
Firm
Topics
Strategy & leadership
Chess knight on a glass compass, icon for strategy and leadership

Diagram

The obsolescing bargain between MNE and host state

  1. At entry
  2. The firm brings capital, technology and know-how, so it bargains from strength
  3. After investing
  4. Assets are sunk and knowledge spreads to local rivals
  5. The government seeks to renegotiate terms
  6. If it escalates
  7. Legal dispute, or partial or total expropriation
  8. The firm stays diminished or leaves

Sources

References

Listed A–Z by author surname, Harvard style. A source with a DOI links to https://doi.org/…; one without links to its page or says plainly that it has no DOI.

  1. Moschieri, C., Ravasi, D. and Huy, Q. (2024) ‘Why do some multinational firms respond better than others to the hostility of host governments? Proximal embedding and the side effects of local partnerships’, Journal of Management Studies, 61(2), pp. 627–685.doi:10.1111/joms.12809Source page
  2. Vernon, R. (1971) Sovereignty at bay: the multinational spread of U.S. enterprises. New York: Basic Books.No DOISource page