On t he other hand firm size and multinationality do

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Unformatted text preview: e other hand, firm size and multinationality do not necessarily provide this bargaining advantage [Fagre and Wells 19821. The primary explanationfor this difference is that while a host government may beable to find alternative sources of capital, it may not easily find alternative sources of technology. This implies that desirable technology can command an unusually high degree of leverage and bargaining position even in countries that are characterized by higher investment risks r i n g 19881. In addition, risk-reducing considerations may push irms that have proprief tary products or technology to choose higher control modes. Such modes i allow fm to modify their investments in such a way that the assets they place in the foreign country are less profitable to the host government in case they are expropriated [Eaton and Gersovitz 19831. Without control, this these fums face an omnipresent threat that host govenunents will change their policies at a future date infavor of local f i i s . Thus:...
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This document was uploaded on 03/22/2014.

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