Table of Contents

Governance, Multinationals and Growth

Governance, Multinationals and Growth

New Horizons in International Business series

Edited by Lorraine Eden and Wendy Dobson

In Governance, Multinationals and Growth, leading scholars celebrate and build upon the pioneering work of Edward Safarian on multinational enterprises and foreign direct investment. The book explores the linkages among multinationals and foreign direct investment, corporate and public governance, and economic growth. The contributors pay particular attention to emerging policy issues that include the behavior of individual governments, intergovernmental organizations and civil society. In addition, they address linkages among MNEs, their governance and economic growth, and generic policy realities (and innovations) in a small-to-medium-sized economy.

Chapter 13: Location Incentives and Inter-state Competition for FDI: Bidding Wars in the Automotive Industry

Maureen Appel Molot

Subjects: business and management, international business, economics and finance, international economics


1 Maureen Appel Molot Georgia lures Chrysler with $320 million: Windsor was dropped from consideration last month. (Bynum, 2002: F2) Ford warns: subsidize or lose jobs. (Keenan, 2002: B1, B4) States’ bidding war over Mercedes plant made for costly chase. (Browning and Cooper, 1993: A6) Buying auto jobs by the thousands: should government spend $160 000 for a spot on the line? (Brent, 2003b: FP1) INTRODUCTION These headlines capture the essence of the question addressed in this chapter – the intensity of inter-jurisdictional bidding wars for auto assembly plant investment. As Safarian (1993) notes, investment incentives have long been used by governments to attract investment and, in many instances, incentives can comprise a substantial portion of the total investment (p. 438). Although these headlines speak to North America, competitive bidding for auto plant investment has occurred elsewhere – in Brazil,2 India3 and East Asia4 in the 1990s and in Europe in the 1980s (Mytelka, 2000, pp. 286–90 and Charlton, 2003). Whether called ‘the location incentives game’, ‘bidding wars’ or a ‘locational tournament’, the point is the same – the inter-jurisdictional competition to attract foreign direct investment (FDI). The growth in the supply of investment worldwide has stimulated competition among governments desirous of attracting ‘their share’ of those funds (Oman, 2000, p. 15). Locational tournaments are not unique to the auto assembly industry – they have unfolded in Europe in the electronics industry (Mytelka, 2000, pp. 290–93) and among the Association of South East Asian Nations (ASEAN) for investments in high tech...

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