Managing Relationships with the Indian Government: The Critical Challenges for Multinational Firms

Rajesh Kumar and Anand Kumar Sethi

Chapter Chapter Eight in Doing Business in India, 2005, pp 115-129 from Palgrave Macmillan

Abstract: Abstract Historically, the relationship between multinational firms and developing countries has been that of conflict.1 This “conflict” view found its expression in the “obsolescence bargaining model” developed by Raymond Vernon.2 This model conceptualized the relationship between multinational firms and host countries in terms of the key construct of bargaining power. When a multinational firm first enters a host country, it has the bargaining advantage at the point of entry but this advantage is lost once the multinational firm invests in the country. The fixed assets of the firm now become a hostage to the policies of the host country and the government can potentially alter the terms of the new bargain in its favor. This framework was originally applied to explain the expropriation of assets of multinational firms active in the natural resources sector. Subsequently, the framework was utilized for explaining investment of multinational firms in the manufacturing sector but with much less convincing results.3

Keywords: Host Country; Foreign Investor; Indian Environment; Nongovernmental Organization; Multinational Firm (search for similar items in EconPapers)
Date: 2005
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Persistent link: https://EconPapers.repec.org/RePEc:pal:palchp:978-1-4039-8057-1_8

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DOI: 10.1007/978-1-4039-8057-1_8

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