Testing the bargaining hypothesis in the manufacturing sector in developing countries

TLDR

The bargaining power model frames economic nationalism as rational self‑interest, positing inherent conflict and convergent goals, and evidence from extractive industries shows that as developing host countries gain power the bargain becomes obsolete, whereas in technology‑mature or globally integrated sectors the shift is slower or may favor multinational firms. A cross‑national study of 563 U.S.

Abstract

The bargaining power model of HC–MNC (host country–multinational corporation) interaction conceives of economic nationalism in terms of rational self-interest and assumes both inherent conflict and convergent objectives. In extractive industries, there is strong evidence that outcomes are a function of relative bargaining power and that as power shifts to developing HCs over time, the bargain obsolesces. A cross-national study of the bargaining model, using data from 563 subsidiaries of U.S. manufacturing firms in forty-nine developing countries, indicates that while the bargaining framework is an accurate model of MNC–host country relationships, manufacturing is not characterized by the inherent, structurally based, and secular obsolescence that is found in the natural resource industries. Shifts in bargaining power to HCs may take place when technology is mature and global integration limited. In industries characterized by changing technologies and the spread of global integration, the bargain will obsolesce very slowly and the relative power of MNCs may even increase over time.