New Horizons in International Business series
Edited by Masaaki Kotabe and Preet S. Aulakh
Chapter 6: Emerging Issues in MNC–host Government Relations in Developing Countries
6. Emerging issues in MNC–host government relations in developing countries1 Ravi Ramamurti One important issue in international business research has been the relationship between multinational corporations (MNCs) and host governments, especially in developing countries. Historically, that relationship has been fraught with conﬂict. In the 1960s and 1970s, host governments in many developing countries – with a few exceptions like Hong Kong or Singapore – feared the power of MNCs and their capacity to inﬂict costs on host countries in the course of optimizing global operations. To guard against these risks, many governments engaged in case-by-case bargaining with MNCs on the conditions under which they would operate in the host country. Typically, these conditions covered such things as the extent of foreign ownership in the host country subsidiary, technology transfer from parent to subsidiary, export requirements, local content requirements, constraints on proﬁt and capital repatriation, or the role of expatriate staff. However, in the 1980s and 1990s, relations between MNCs and host countries changed dramatically. As Dunning (1998: 280) notes, they changed from being ‘predominantly adversarial and confrontational to being non-adversarial and cooperative’. Raymond Vernon, who drew attention (Vernon 1977) to the conﬂicts between MNCs and host governments, noted in In the Hurricane’s Eye (Vernon 1998) that many developing countries had begun actively to court MNCs and foreign direct investment rather than to block or screen them out. Similar sentiment is echoed in Weigel et al. (1997) and in ofﬁcial publications like the United Nations’ World Investment...
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