International Business Chapter 8
Chapter 8-Political Forces
6. How can international companies use their strengths to influence government policies?
International business is not merely a passive victim of political forces. It can be a powerful force in the world political arena. As noted in chapter 1, about half of the world’s 100 biggest economic units are firms, not nations. (257)
International companies repeatedly make decisions about where to invest, where to conduct research and development, and where to manufacture products. The country or area in which an investment is made or a laboratory, research facility, or manufacturing plant is located can benefit as jobs are created, new or improved technology becomes available, or products are produced that can be exported or substituted for imports.
The financial size of many international companies provides them with a strong negotiation position, and an international companies’ power need not rest solely on size. It can come from the possession of capital technology, and management skills, plus the capability to deploy those resources around the world.
A foreign firm may possess a stronger political influence on government policies
Than a domestic firm because its advanced technology could be highly valued and desired by a government wishing to promote economic growth. However, as it will be seen in the next section, traditional models of government policies towards aliases of foreign MNE assume that a government will privilege domestic firms over foreign firms, for electoral or nationalistic reasons.
Among the costs of going abroad faced by a firm, can be found those engendered by a lack of societal legitimacy and by economic nationalism (Zaheer, 1995; Kostova and Zaheer, 1999). Thus conventional frameworks, describing host country policies towards aliases of foreign MNE, suggest that foreign firms will be discriminated against domestic firms. For instance, in the national preference model exposed in Caves (1996), a
6. How can international companies use their strengths to influence government policies?
International business is not merely a passive victim of political forces. It can be a powerful force in the world political arena. As noted in chapter 1, about half of the world’s 100 biggest economic units are firms, not nations. (257)
International companies repeatedly make decisions about where to invest, where to conduct research and development, and where to manufacture products. The country or area in which an investment is made or a laboratory, research facility, or manufacturing plant is located can benefit as jobs are created, new or improved technology becomes available, or products are produced that can be exported or substituted for imports.
The financial size of many international companies provides them with a strong negotiation position, and an international companies’ power need not rest solely on size. It can come from the possession of capital technology, and management skills, plus the capability to deploy those resources around the world.
A foreign firm may possess a stronger political influence on government policies
Than a domestic firm because its advanced technology could be highly valued and desired by a government wishing to promote economic growth. However, as it will be seen in the next section, traditional models of government policies towards aliases of foreign MNE assume that a government will privilege domestic firms over foreign firms, for electoral or nationalistic reasons.
Among the costs of going abroad faced by a firm, can be found those engendered by a lack of societal legitimacy and by economic nationalism (Zaheer, 1995; Kostova and Zaheer, 1999). Thus conventional frameworks, describing host country policies towards aliases of foreign MNE, suggest that foreign firms will be discriminated against domestic firms. For instance, in the national preference model exposed in Caves (1996), a
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