Question

MNEs are bargaining with host governments that – in many countries – are elected by the population. Is it legitimate to pressure governments to make concessions that the voting public would not agree with?

Answer 1

MNEs are bargaining with host governments that – in many countries – are elected by the population. MNEs have become bigger in size and have great bargaining power when working out on a deal with the host government. The country seems to have lost some of its powers in shaping major events. The MNEs play a major role in influencing some of the policies to its advantage and the developing countries comply with it in order to attract FDI as an end market to increased latent growth potential. An outcome of mediation between MNEs and nations - the extent of the foreign control of subsidiaries-is determined by the negotiating power of the 2 parties. Foreign control appears to be influenced by the technology level of the MNE, degree to which an MNE attempts product differentiation, the range of products offered by an MNE, and the degree of competition by other MNEs. The relationship between the above-listed variables and control is not simple. The govt. chooses a policy that deals with the multinational enterprise; the firm opts for a strategy that deals with the govt. On the govt side, the result is that mostly the bargaining may be seen through a regulatory framework and favorable policies that are presented to the MNE. It is always in the best interest of the home country of the MNE. In order to project economic growth, the developing countries sometimes comply with the negotiations proposed by the Multinationals. It is not legitimate to pressure governments to make concessions that the voting public would not agree with. A calculated move made in this direction might prove to be beneficial.