The growth of the multinational corporation (MNC) is one of the most revolutionary and controversial phenomena in the development of the world economy during this century. MNCs are business firms that own or control production in more than one country. In practice, the largest MNCs orchestrate an ensemble of investments scattered across dozens of countries. Tied together by a vast communications web, these firms match various corporate functions, such as research and development, production, and marketing, with locales around the globe that feature the right mix of necessary ingredients, whether these be the skills and wage rates of local labor, the tax and regulatory policies of governments, the availability of needed infrastructure, or the supply of natural resources.  The sheer size of many MNCs, combined with their economic efficiency and international mobility, not only provides such firms with a key place in the world economy, but also endows them with considerable political power and influence.

In recent decades, MNCs have expanded in numbers, size, and economic clout. Between 1980 and 1997, global foreign direct investment grew at an annual rate of 13%, compared with 7% per year for exports. In 1999, total FDI outflows from developed countries reached $595 billion. The number of firms worldwide that engage in FDI has more than tripled over the past three decades. By 1997, 54,000 parent MNCs controlled 449,000 foreign affiliates around the world representing an overall investment valued at $3.4 trillion. The worldís two hundred largest corporations now account for more than 25 percent of all global economic activity. U.S. MNCs earn twice as much in revenue from manufacturing operations abroad as from exports. Indeed, one third of all world trade takes place on an intrafirm basisóamong different units of the same global company. The yearly sales of the largest MNCs dwarf the annual GNPs of a vast majority of Third World countries and the annual sales of the world's largest MNCs exceed the combined national incomes of 182 countries. Among the 200 largest MNCs, 62 are based in Japan, 53 in the United States and 23 in Germany. Only two of the top 200 are headquartered in the developing world.

The large-scale movement of modern foreign direct investment (FDI) to the Third World dates from the turn of the century. The earliest MNCs to invest in the developing countries focused on agricultural goods and the extraction of raw materials. The demands of rapidly growing Northern industries as well as the rising affluence of European and North American consumers created a healthy market for Southern resources and cash crops. Very little Northern investment in the South flowed into manufacturing at this stage. In 1914, for instance, mining, oil, and agriculture accounted for 70 percent of all U.S. FDI located in developing countries, whereas manufacturing amounted to only 3 percent.

The composition of FDI in the Third World began to change during the interwar period. U.S. firms, in particular, established growing numbers of manufacturing subsidiaries in Latin America. By 1939 Latin America was the home of two hundred foreign-owned manufacturing operations, two thirds of the total for all developing countries.  Yet foreign investment in Third World manufacturing did not really take off until after World War II. Today the subsidiaries of Northern-owned MNCs account for substantial shares of invested capital, employment, and output in the manufacturing sectors of most Third World countries. Their dominance is greatest in the most technologically advanced types of products and manufacturing processes.

Nevertheless, despite growth in the absolute levels of foreign investment in the South, FDI has expanded even more quickly in the North. On the eve of World War I, FDI located in the developing countries accounted for 60 percent of the total worldwide. By the early sixties, the Third World share of FDI had fallen to one third. This proportion fell further to roughly one quarter in the mid-1980s.  By this latter period, over one half of all U.S. FDI was located in only five developed countries (Britain, Canada, Germany, Switzerland, and the Netherlands).

The relative significance of FDI to Third World economies has varied considerably over time. MNC investment in the South grew from an annual average of $2.6 billion during 1967­69 to $12.8 billion in 1979­81. Largely due to rising levels of commercial bank lending, however, the share of FDI in overall private financial flows to the Third World declined from over 50 percent in 1970 to 20 percent in 1985. Indeed, levels of new foreign investment fell absolutely during the early eighties, dropping to an annual average of roughly $10 billion. A modest turnaround began in 1986 as the flow of FDI to developing countries increased to $12.5 billion. During the same year, FDI again accounted for almost 50 percent of private financial flows. This was largely due, however, to a collapse in bank lending to the Third World.

The nineties have witnessed a major resurgence in FDI flows to the Third World, reaching $163 billion in 1997. If portfolio investment, in the form of stocks and bonds (see Chapter 12 for a discussion of portfolio investment), and bank lending are included, total net private investment flows from North to South reached $299 billion in 1997. The South's share of overall FDI inflows also increased to 37% in 1997. Yet these foreign investments are highly concentrated in a handful of relatively prosperous Southern countries. In 1998, for example, ten countries accounted for 70% of all FDI flows to the developing world. The least developed countries, by contrast, receive a combined share of only one half of one percent of total global FDI.

This revival of FDI flows to the Third World has been prompted by a variety of factors: falling interest rates in the North, the loosening of regulations on foreign investments in the South, rapid economic growth rates in some of the principal host countries, the emergence of debt­equity swaps as a tool for transforming Third World debt into equity investments (see the discussion of debt­equity swaps in Chapter 12), and new opportunities to purchase previously state-owned firms recently privatized by Third World governments.

Motives for Foreign Direct Investment in the Third World

Northern firms have a variety of motives for investing in Third World countries. Some seek access to Southern resources. Extractive industries, such as mining, oil, or timber, are attracted by the presence of raw materials or mineral deposits. Many Southern countries, by virtue of their climate or geography, are particularly well suited to the production of cash crops desired in the North, such as sugar, coffee, cocoa, or tropical fruits. Northern agribusiness firms invest in the production, processing, and packaging of such agricultural commodities in the South.

Manufacturing firms have greater freedom over where they locate their investments than do natural resource producers. The former often have a choice between servicing foreign markets through export or foreign investment. Decisions to invest in the Third World are influenced both by competitive pressures in particular industries and by the incentives created by government policies. One school of thought, known as product life-cycle theory, suggests that firms that gain a monopoly position as a result of successful innovation will move abroad in search of new markets or lower costs as a means of preserving higher-than-normal profits after imitation has begun to erode their initial advantage over rivals at home.

Most manufacturing FDI in the Third World produces commodities aimed at the local market. This sort of investment is most common in the larger, more prosperous Southern countries that have sizable and therefore attractive consumer bases. MNCs may decide to produce in such countries rather than export in order to better adjust to local tastes or to take advantage of lower labor or capital costs.

Often, however, the decision to invest abroad is prompted by the necessity of jumping protectionist barriers in order to gain access to Third World markets. Southern governments may erect tariffs or other sorts of barriers precisely in order to discourage imports while encouraging local production of the protected goods. The aim of this strategy, often referred to as import substitution, is to spur industrialization. Many MNCs have discovered ways to benefit from such policies. A single large factory can service the entire local demand for a given product in many Third World countries. Thus the first foreign firm to gain entry can profit handsomely. Freed from competition due to the umbrella of protection and the limited size of the domestic market, the local subsidiary can establish an effective monopoly, allowing it to charge higher prices and earn greater-than-normal profits. This very fact has engendered local resentment toward foreign firms.
For some firms, the primary incentive to invest in the Third World is to escape environmental regulations or higher taxes in their home country. Indeed, those Southern countries with a particularly urgent need for foreign investment have often explicitly molded their tax and regulatory policies to attract the interest of Northern multinationals.

Finally, foreign-owned assembly operations have been established in many Third World countries in order to take advantage of the low wage rates characteristic of Southern labor markets. Typically, products assembled in such factories are exported back to Northern markets, where they can be priced competitively vis-à-vis similar goods produced by other firms with more- expensive Northern labor.

The Benefits of Foreign Direct Investment to Third World Host Countries

Our primary concern in this chapter is with the impact of foreign direct investment on the Third World and the relationship between MNCs and host countries. Considerable debate surrounds these topics. Defenders of MNCs argue that FDI stimulates economic growth and development. MNCs augment scarce local resources and bring with them a package of assets that can seldom be matched by indigenous firms.  Elements of this package include:

Capital
Many Third World countries are characterized by low rates of domestic savings. As a result, their economies are dependent upon external capital flows to finance new investment. FDI offers one means by which scarce local capital can be supplemented. To be sure, MNCs demand a price for injecting fresh capital into the host countryís economy. Specifically, foreign investors prefer to repatriate a large portion of the profits they earn abroad. Yet the terms of FDI often compare favorably with those accompanying other sources of external financing. Commercial loans from Northern banks, for instance, carry interest charges that must be paid regardless of whether the local investment they finance proves profitable. In contrast, although MNCs share in the benefits from FDI, they also bear much of the risk. If one of its Third World subsidiaries loses money, an MNC will find that there are no profits to repatriate. Indeed, the headquarters of the firm may well choose to inject new capital into the failing subsidiary in an attempt to turn the operation around and salvage its initial investment. FDI also offers certain advantages over foreign aid. Although foreign assistance may be provided on favorable financial terms, it often comes with political strings attached, whether implicit or explicit. This is seldom the case for FDI.

Technology
Although some Third World countries have managed to establish impressively modern manufacturing sectors, the vast majority of the new technology created worldwide still originates in the laboratories and universities of the North. Indeed, MNCs account for 80% of all civilian research and development expenditures worldwide.  MNCs provide one mechanism by which Northern technology is transferred to the Third World. MNCs tend to invest in the most technologically advanced sectors of Third World economies, supplying goods and services that are beyond the technological capacity of local firms to produce efficiently. MNCs also aid in technological diffusion through means such as licensing technology to other firms or passing along knowledge, skills, and techniques to local partners through joint ventures.

Management Expertise
The Third World subsidiaries of MNCs often organize production more efficiently than do local firms due to superior management skills and techniques. MNCs possess great experience in managing large-scale enterprises. Branch plant managers can draw upon the vast storehouse of information and expertise contained within the corporation as a whole. Knowledge of modern management methods is spread through the training of indigenous personnel, whose representation in the ranks of management typically grows at the expense of expatriates the longer the MNC subsidiary is in place.

Marketing Networks
Even where local firms can match MNCs in price and product quality, they may lack easy access to the extensive foreign marketing networks available to Northern firms. MNCs often possess long-standing relationships with, or even control over, Northern wholesale and retail outlets, enjoy greater information about market demand and consumer tastes, and command larger advertising resources.

The Costs of Foreign Direct Investment to Third World Host Countries

Critics argue that the economic and political costs of FDI often outweigh the benefits.  Many criticisms center around differences between foreign and domestic firms and the ways they do business.

MNCs are accused of earning excessive profits in Third World countries, made possible by their oligopoly position in local economies.  The largest proportion of these profits is repatriated to shareholders in the firmís country of origin rather than reinvested locally. According to some studies, MNCs also overcharge for technology transfers to their own subsidiaries and rely more heavily upon imported parts and machinery than do domestic firms. Each of these practices tends to reflect negatively in the host countryís balance of payments position.

Critics contend that MNCs often borrow from the already scarce supply of local capital rather than bring new investment funds into the country. Because of their size and resources, foreign firms typically receive preferential terms from local banks when borrowing money, as compared with local firms. Another criticism is that MNCs discourage local entrepreneurship by often entering a country through the acquisition of an existing Third World firm or using superior resources to drive native competitors out of business.

Third World governments particularly object to a common MNC practice known as ìtransfer pricing.î MNCs resort to this technique in an attempt to lower their overall tax burden or to evade restrictions on the repatriation of profits. Transfer pricing is essentially an accounting practice applied to intrafirm trade. Different branches or subsidiaries of the same firm, located in different countries, often exchange goods. A U.S.-based manufacturer, for instance, might produce parts in a factory located in Texas but ship these parts to a plant in Mexico for assembly. In turn, the assembled product is transported back to the United States for final sale. The price that the home firm charges the Mexican subsidiary for the parts or that the subsidiary charges the home firm for the assembled product is essentially arbitrary because these transactions take place within the same company and are not exposed to market forces. If, let us say, Mexico imposes a higher tax on corporate profits than does the United States, then the MNC can lower its overall tax bill by overpricing the parts shipped to Mexico while underpricing the assembled products that are ìsoldî back to the home firm in the United States. By manipulating the prices on intrafirm trade in this way, the Mexican subsidiary will show little profit on its books, thus avoiding the high Mexican tax rate, while the profit of the home firm will be artificially boostedóallowing it to be taxed at the low U.S. rate. This sort of practice is hard to detect because it is difficult to know what the products might have sold for in armís-length transactions among independent firms. Because most Third World countries tax the profits of foreign corporations at relatively high rates, they are often targets of transfer pricing schemes and suffer a loss of potential tax revenue as a result.

Some forms of FDI represent attempts to export pollution from Northern countries, where environmental enforcement is stringent, or to exploit reserves of cheap labor. In Ilo, Peru, for instance, local villagers suffer from serious respiratory and other health problems stemming from the air and water pollution produced by a nearby copper smelter plant owned by three large American corporations. The plant emits up to two thousand tons of sulfur dioxide into the air each dayóten to fifteen times the legal levels for similar operations in the United Statesóas well as streams of toxic wastes that make their way into the local water supply.

Mexico is host to 4,500 product assembly plants located along the border, a number that has doubled since 1994. Called maquiladoras, one half of these plants are U.S.-owned and the majority of their output is shipped to U.S. markets. In total, the maquiladora sector employs one million Mexicans and generates $10 billion per year in foreign exchange for the Mexican economy. Some of the U.S.-owned plants relocated to Mexico to take advantage of lax Mexican environmental laws and to break free of stricter regulations in the United States. A study by the American National Toxic Campaign found that of twenty-three such factories sampled, seventeen were responsible for significant toxic waste discharges. Compared with nearby San Diego, Tijuana's waste water contains ten times more chromium, eight times more nickel and three times more copper. Much of southern Californiaís furniture industry has moved across the border to escape severe air pollution controls on solvent emissions.

Mexico has recently taken steps to tighten its environmental laws and to crack down on polluters, but its enforcement mechanisms remain inadequate. Only fifteen environmental inspectors are available for the entire state of Chihuahua, which includes the major city of Juarez. Mexico's single landfill site for the disposal of toxic wastes is capable of handling only a small fraction of the country's toxic waste production. Most of the rest is dumped illegally, despite laws mandating that toxic wastes be returned to the country from which the raw materials orginated. The NAFTA side agreement between the US and Mexico set up a Commission for Environmental Cooperation. The Commission may investigate complaints by citizens that environmental laws in their own country are being ignored, but its recommendations are not binding on governments.

In addition to the environmental problems associated with maquiladoras, critics point out that the jobs created through these factories are extremely low paying and that work conditions as well as health and safety standards are far below those in the United States. The factory cities that have mushroomed along the border in recent years have proven unable to add new infrastructure fast enough to keep up with growing populations. Eighteen percent of Mexican border towns have no drinking water, thirty percent have no sewage treatment and forty three percent have insufficient garbage disposal. Moreover, maquiladoras have developed few backward linkages to the rest of the Mexican economy. Of the $23 billion in physical inputs consumed by the maquiladora industries yearly, only 2 percent is supplied by Mexican sources.

FDI also carries political risks. MNCs may appeal to their home government to exert pressure on a host state when disputes arise. The Hickenlooper Amendment, passed by the U.S. Congress in 1962, requires that aid be denied to countries that nationalize the assets of U.S. corporations without prompt and adequate compensation. The law has been applied, or its use threatened, on several occasions. More dramatically, the United States, through the use of CIA covert operations and economic pressure, took part in the overthrow of governments in Iran (1953), Guatemala (1954), and Chile (1973) after the assets of firms from the United States and other Northern countries were nationalized. Although other factors influenced these decisions, the desire of U.S. officials to defend U.S. corporate interests abroad played an important role in all three instances.

A Bargaining Framework for Analyzing MNC­Host Country Relations

Are MNCs a boon or a burden to Third World host countries? The answer is more complex than either of the two perspectives just outlined would suggest. Whether the benefits of FDI outweigh the costs depends substantially upon the balance of bargaining power between the firm and the host state. This bargaining relationship determines whether a state will have the capacity to control the activities of foreign investors and thus limit negative impacts. In this section, we first review the various types of regulation that Third World states have attempted to impose upon MNCs in the past. We then examine the sources of bargaining power available to each party.

Regulating MNC Behavior

During the seventies, in particular, Third World states adopted a variety of regulations designed to control and channel the activities of MNCs. Many countries exclude foreign investment in certain crucial sectors of the economy such as public utilities, mining, steel, retailing, insurance, and banking. In some cases, foreign investors are required to form joint ventures providing majority control to local partners. A number of Latin American countries limit profit repatriation and technology payments by foreign-owned subsidiaries. Requirements that a stated percentage of production must be exported are common. Some countries require that indigenous labor be hired into middle- and upper-level management positions. Several countries have placed limits on MNC access to local capital markets in an effort to encourage greater contributions of external financing for new investments. Finally, attempts have been made to encourage MNC subsidiaries to carry out local research and development.

These controls have been imposed most successfully by the larger, more prosperous Third World countries, which are in a relatively strong position to bargain over the terms of FDI. In addition to the risk that demanding regulations will simply scare away foreign investors, smaller, less-developed countries have a more difficult time enforcing investment rules.

Indeed, impressively strict regulations designed to enhance local control often have surprisingly little effect on MNC operations in practice.  Consider the common stipulation that MNCs must enter into joint ventures providing majority ownership to local partners. Compliance with this regulation is often achieved through fictitious means. A foreign firm will simply lend to the local partner the capital needed to acquire majority ownership. Or the original equity investment in the project is held artificially low so as to make it possible for the local partner to come up with the required money. The enterprise then funds its operations through debt rather than equity, often borrowing funds from the parent company of the foreign partner. These sorts of nominal shareholding arrangements create the illusion, without the reality, of a large local stake in the enterprise.

Even where local partners legitimately put up the majority of capital to fund a project, they seldom exercise real control. The MNC typically provides raw materials, equipment, spare parts, financing, technology, managerial skills, and marketing services. Because the keys to the success of the enterprise are in the hands of the foreign partner, so is effective control over how it is run. Foreign control may in fact be formalized in basic agreements concluded at the outset of the venture that reserve key functions to the MNC.

Many countries attempt to ensure that MNCs hire, train, and promote local workers into management positions or require that a certain proportion of the final product consist of locally produced parts. Yet the first restriction is often waived when foreign subsidiaries attest that people with the requisite skills and experience are not available locally. In some cases, local managers are hired but given little responsibility. Local content rules can be circumvented by using creative accounting to inflate the value of the portion of the overall product accounted for by local inputs.

The Andean Pact represents one attempt to overcome the poor bargaining position of small countries. In December 1970 Bolivia, Colombia, Chile, Ecuador, and Peru (Venezuela was added in 1973, while Chile abandoned the group in 1976) announced Decision 24óan agreement on ìcommon treatment for foreign capital, trademarks, patents, licensing agreement, and royalties.î This agreement imposed a common set of new regulations on MNCs operating in pact countries. These regulations included the exclusion of FDI from certain economic sectors, limits on profit repatriation and access to local lending, a phased-in reduction of foreign ownership in MNC affiliates to a maximum of 49 percent, and controls on technology transfer and royalty payments. The impact of these regulations has been mixed. Technology payments were renegotiated downward after implementation of the pact, and local participation in MNC operations increased. Due to incomplete data, however, the effect of Decision 24 on flows of new FDI is difficult to judge with precision. Investments by U.S. MNCs in pact countries continued to increase during the late seventies, but at a slower pace than in the rest of Latin America.

The difficulty with national, or even regional, controls is that MNCs can reallocate their investment flows toward countries that offer less interference. Thus many Third World countries have long called for a strict, binding global code of conduct for MNCs.  Northern countries, however, have resisted these demands. Instead, in 1976 the OECD sponsored a weaker, voluntary code that lacked Third World approval.  In the late eighties, negotiations over international regulation of MNC activities resumed under the auspices of the United Nations Center on Transnational Corporations (UNCTC). After several years of North­South stalemate, however, these negotiations were quietly set aside, and the UNCTC was itself disbanded.

A very different effort to forge global rules for international investment also ended in failure during the 1990s. Northern governments and corporations pressed in the mid-1990s for a new accord to be labeled the Multilateral Agreement on Investment (MAI). The principal purpose of the MAI was to insure greater respect for corporate property rights in host countries and to gain broad acceptance of the principle that foreign corporations should be regulated according to the same rules that apply to locally owned firms. The MAI was vigorously opposed by a coalition of NGOs who believed that the proposed agreement would weaken the ability of governments to regulate corporate behavior in the name of broader public interests. As a result of NGO opposition, along with unresolved differences between the U.S. and some European governments, the MAI negotiations were allowed to lapse without success in 1998.

In the wake of the collapse of the MAI negotiations, the OECD updated its voluntary code of conduct for MNCs after extensive consultation with a group of 75 environmental and human rights non-governmental organizations. The revised code sets new labor and environmental standards, as called for by many critics of corporate behavior. Although NGOs continued to press for a binding rather than voluntary code, a spokesperson for the NGO coalition called the new rules " a first step in the right direction of achieving true corporate accountability"

The Determinants of Relative Bargaining Power

MNCs and Third World states are engaged in an interdependent relationship. Each party wants something from the other. The principal concern of the MNC is to maximize profits. To accomplish this, it must gain access to the resources, markets, or cheap labor of the Third World country where an investment opportunity presents itself. The goals of the host state are diverse. Third World political leaders are attracted to the jobs, skills, output, technology, and global marketing power that MNCs have to offer.

Although the goals and interests of the two parties are potentially compatible, the MNCís desire to maximize profits may, as we have seen, lead it to engage in practices that reduce the benefits accruing to the host country. Third World countries are therefore often inclined to regulate and control MNC behavior so as to maximize host countriesí share of benefits from the investment.

The host countryís ability to successfully set the terms under which foreign investors do business in that country is constrained by its relative bargaining power. The countryís principal bargaining advantage is its capacity to control access to the country and to exert legal control over foreign business operations after an investment has been made. The MNC, however, is far from helpless. Its power derives both from the package of assets it has to offer the host country and from its mobility. If the host state drives too hard a bargain, imposing regulations so onerous as to substantially erode the profit-making potential of foreign-owned subsidiaries, MNCs may take their business elsewhere or, less drastically, simply devise ways of evading regulations.

The balance of bargaining power between foreign firms and host countries may vary according to: (1) the characteristics of the host country, (2) the characteristics of the investment, and (3) changes in the international economic environment.  We review each of these factors in the following sections.

Characteristics of the Host Country

Host countries possessing characteristics that render them attractive to foreign investors are likely to find themselves in a relatively strong bargaining position. The more lucrative the investment, the more likely it is to be made in spite of heavy host state regulation. Thus Third World countries with large domestic markets, skilled and disciplined work forces, bountiful natural resources, and well-developed infrastructures can afford to drive hard bargains with foreign firms that, presumably, will be eager to gain access to the country and its many economic opportunities.

The host countryís position is also strengthened to the extent that it has available alternatives to foreign investment. If, for instance, the country already possesses a strong industrial structure, whether public or private, or is able to accumulate capital locally due to a high domestic savings rate, then its dependence on FDI is lessened. The price that the host state can demand of foreign investors for the right of entry is likely to go up.

Finally, states with large, sophisticated, and honest bureaucracies will be in a better position to bargain on an equal basis with highly skilled MNC negotiators. They will also possess a greater capacity to gather critical information, monitor MNC behavior, and enforce relevant laws and regulations.

Some Third World countries, such as Brazil, Mexico, and South Korea, possess many, though not all, of these characteristics. Yet most Southern countries lack, in varying degrees, a considerable number of the crucial characteristics that might place them in a favorable bargaining position with foreign firms.

Characteristics of the Investment

The bargaining relationship between governments and firms may vary across different investment projects within the same country. Some types of industry are more easily regulated than others. Bargaining leverage shifts to the host state when projects involve well-known and slowly changing technologies. In such cases, it is well within the capacity of state- or locally owned private firms to manage the production facility in question or to establish competing projects. Low-technology foreign investment is therefore often subject to heavy regulation, intense local competition, or even outright nationalization.

Investment projects resting upon more-sophisticated or rapidly changing technology are less vulnerable to state demands. In these cases, the local skills and knowledge needed to manage the project or to create competitive local alternatives may not exist. Moreover, the success of such ventures depends upon continuous infusions of new technology from the home firm. This increases the host stateís dependence upon a foreign firm and places the latter in a strong bargaining position.
Much the same logic applies with respect to the foreign marketing requirements associated with production for export. Products marketed through complex networks, especially when the latter are controlled by the multinationals themselves, may require the cooperation of foreign firms if they are to be exported successfully. When products can be more readily sold abroad by state- or locally owned private firms, it is easier for Third World governments to escape dependence on foreign capital and to assert control over local production.

Capital-intensive projects typically require large fixed investments in factories and machinery. After these are in place, the foreign firm is hostage to state control due to high sunk costs. Only continued production and sales will possibly allow the firm to recoup its sizable initial outlay. Where fixed investment is low, however, a firm can more easily close up shop and relocate to a different country should state demands prove intolerable. Thus the size of the initial investment influences relative bargaining power.

Related to this point is the fact that potential foreign investors have greater bargaining power before a project is established than after. Knowing that the host state may be eager for additional investment, the firm will seek explicit pledges of favorable treatment prior to committing to a project. MNCs often attempt to play countries off against one another in an effort to strike the best and most reliable deal. After the project is in place, however, the firmís threat to relocate becomes less credible, and further concessions will be difficult to obtain. Indeed, Third World states often seek to alter the original bargain in their own favor.

In general, Third World bargaining power has been greatest with respect to mining and raw materials investments. These projects typically involve well-known and slowly changing technologies, simple marketing requirements, and high fixed investments. Owing to these factors, many foreign-owned extractive operations were nationalized by Third World governments during the seventies.

MNCs usually have greater leverage in manufacturing industries, especially those involving sophisticated and changeable technologies, complex foreign marketing requirements, and low fixed investments. Indeed, it is in just such industrial sectors that the concentration of MNC ownership is highest in the Third World.

Changes in the International Economic Environment

The balance of bargaining power between states and firms can vary over time due to a changing international economic environment. During the seventies, for instance, external conditions tended to strengthen Third World states relative to MNCs. Growing competition among MNCs made it easier for governments to play firms off against one another in an attempt to achieve a more favorable bargain. In particular, previously dominant U.S. firms now faced growing competition from European and Japanese MNCs. After falling from a high of over 60 percent during the sixties, the U.S. share of the total world stock of foreign direct investment declined further from 46 percent in 1980 to 25 percent in 1993. Although the United States accounted for 31 percent of new FDI flows from 1980 through 1984, this proportion fell to 17 percent from 1985 through 1989.  Moreover, European and Japanese firms often proved more tolerant of state regulation than did U.S. corporations.

Another international economic factor that favored Third World states during the seventies was the growing availability of commercial bank lending. This provided an alternative source of capital and lessened Third World dependence upon FDI. Able to do without MNCs more easily, governments of developing countries tightened regulations and funneled borrowed funds into state-owned corporations that sometimes served as direct competitors to existing foreign firms.
Finally, the seventies were a time of relative growth and prosperity for many Third World countries. Manufacturing exports expanded rapidly. Moreover, world prices for raw material commodities were high during the first half of the decade. The wave of Third World nationalizations of foreign investments in extractive industries was largely prompted by host state efforts to ensure that the benefits of these soaring prices would be captured locally rather than carried abroad in the repatriated profits of MNCs.

These favorable conditions changed rapidly during the eighties. A Northern recession led to declines in both Southern manufacturing exports and commodity prices. This, combined with higher oil prices and rising interest rates, led to a financial squeeze that culminated in the Third World debt crisis. As many countries teetered on the brink of insolvency, Northern banks drastically contracted their lending operations in the Third World.

Suddenly, many Third World countries came to view increased flows of FDI as one of the few available options that might allow them to sustain economic growth while simultaneously digging their way out from under a mountain of debt. Yet just when it was most needed, flows of FDI to the South entered a period of absolute decline. This was prompted in part by the dire economic circumstances in most Third World countries, but it was also a result of the strict regulations and controls that many MNCs confronted in developing nations.

Most Third World states, facing an unfavorable international economic environment and chastened by declining investment flows, were led by their weakened bargaining position to loosen controls on foreign investment as the eighties progressed. Mexico entirely revamped its foreign investment codes, removing many of the restrictions imposed during the seventies. Venezuela has done the same and has recently decided to invite back many of the same international oil companies whose assets it nationalized in 1976 to help with the exploitation of the Orinoco Belt.  Many developing nations, especially in Asia, now offer special incentives to MNCs willing to set up assembly operations in so-called export processing zones. Governments seek to attract export-oriented production by offering tax, tariff, and regulatory concessions to foreign firms that agree to establish factories in these special areas.  Other common elements of deregulation include guarantees of unrestricted profit repatriation, tax breaks, special electrical rates, the removal of export and local input requirements, and streamlined approval procedures.

These relaxed controls and new incentives have contributed to the renewed interest of multinational corporations in the Third World and have stimulated new investment flows. They also reflect, however, the weakened bargaining positions that most Third World states possess vis-à-vis foreign firms. The terms of the typical investment deal have swung decidedly in favor of the latter during the past two decades.

This bargaining framework approach to understanding the relationship between host states and foreign firms offers considerable advantages over treatments that exaggerate either the virtues or the villainy of MNCs in the Third World. Southern states can potentially influence the balance between the costs and benefits of FDI by setting the terms under which the subsidiaries of MNCs must operate. Whether a given government can do so effectively without discouraging desired flows of investment depends upon the relative bargaining strengths of the state and the firm. This, in turn, varies across countries and industries as well as across time.

A bargaining approach does, however, contain one major drawback. This sort of analysis is based upon the assumption that state managers in developing societies are motivated only by the desire to serve the national interests of their own country. The primary goal of the political leadership is to maximize the economic welfare of the society as a whole through the bargains it strikes with foreign investors. In some cases, however, this is an unrealistic assumption. Some observers argue that although political elites in Third World countries may sometimes possess the capability to bargain effectively with foreign corporations, they often lack the political will to do so.

This is most obviously the case when MNCs use their considerable resources to win favors through bribery and corruption. In one example, five nations banded in 1974 to form the Union of Banana Exporting Countries. Each government agreed to place an export tax on banana exports. One of the affected corporations, United Brands, paid a $1.25 million bribe to the Honduran minister of economics. In return, the Honduran government partially reneged on its agreement with other banana-exporting countries by cutting its export tax from fifty cents to twenty-fiveóa move that would have saved United Brands from $6 to $7 million yearly. In this case, United Brandsís efforts backfired. Unlike most such episodes, news of the deal leaked to the public, and the Honduran government was overthrown.

Northern governments have recently undertaken efforts to root out the nexus between foreign investment and corruption. In 1997, the 34 members of the OECD agreed upon a clean practices convention designed to curtail corporate bribery and corruption in their dealings with host country officials. As of mid-2000, however, only 18 of the 34 signatory countries had ratified the pact.

Corruption is not the only threat to host state autonomy. Some Third World elites maintain power in part through close military, economic, and political relationships with the home governments of local MNC affiliates. Vigorous efforts to control MNC activities may threaten to sour these relationships. One study, for instance,  has found that the U.S. government regularly brings political and diplomatic pressure on host governments to win special consideration for U.S. firms seeking to invest in Southern countries.

 Conversely, political motives may sometimes prompt Third World leaders to adopt an overly restrictive stance toward MNCs, purposely discouraging investments that could bring considerable benefits to the country. This might be the case, for instance, when the legitimacy of a government rests upon its nationalist appeal. Under these circumstances, MNCs may provide convenient scapegoats, perhaps diverting attention from government responsibility for other pressing national problems. Finally, some Third World governments may be divided on the question of foreign investment and thus unable to adopt any consistent bargaining position.

These considerations suggest the need for caution in applying a bargaining analysis to host state­MNC relations. Nevertheless, considerable evidence suggests that host states have in fact proven eager, in most instances, to strike better deals with MNCs when their bargaining position so allows. The extremes of co-optation or destructive defiance appear the exceptions rather than the rule.

Recent Trends in MNC­Host Country Relations

Several important trends are reshaping the nature of foreign investment in the Third World. The geographic locus of investment flows has shifted from Latin America and the Middle East to Asia. Three long-term shifts in the sectoral orientation of MNC activities in the Third World are also continuing. Manufacturing investments are increasingly favored over those in the extractive industries, while, within the manufacturing sector, export-oriented production is growing faster than production for the domestic markets of the Southern host countries. Recently, however, FDI growth has been swiftest in the service sector of Third World economies. Finally, the terms of MNC entry into Third World countries are changing dramatically, with foreign firms increasingly shedding the risks of outright ownership in favor of more-limited and indirect forms of involvement in the Third World.

East Asiaís share of global foreign direct investment rose from 3 percent in 1987 to 22 percent in 1997.  China alone attracted $270 billion in FDI from 1992-1999, almost half of all FDI flowing to the developing world during that period.  The redirection of foreign direct investment toward East and Southeast Asia is both a response to, and a partial source of, the rapid economic growth rates experienced over the past three decades by many countries of the region, including China, South Korea, Singapore, Taiwan, Hong Kong, Thailand, Malaysia, and Indonesia.

The initial surge of FDI to East and Southeast Asia was led by large Japanese firms beginning in the mid-1980s. Japanese investment in the surrounding region was prompted in part by the accumulation of vast financial resources as a result of Japanís export successes. Japanese firms also sought low-cost manufacturing sites abroad as a way of compensating for increasing Japanese wage levels and the rise of the yen. Between 1985 and 1989 the flow of Japanese capital, including FDI, to other Asian economies grew sixfold in dollar terms. Japanese firms focused on countries with well-educated and disciplined work forces, such as Thailand and Malaysia.

Although Japanese FDI to Asian countries slowed in the mid-1990s, the slack was picked up by American and European firms. The Asian financial crisis that began in 1997 dramatically curtailed bank lending and portfolio investment flows to that region and stymied economic growth for a time. Yet FDI flows to Asian countries fell only slightly during this period, reflecting the longer time horizon of MNCs as compared with stock and bond holders.

While Asia attracted the largest share of FDI among developing country regions in the 1990s, other Southern countries have benefited from growing FDI flows as well. Latin America attracted 14% of global FDI in1997.  Brazil captured $31 billion in FDI in 1999, while Mexico and Argentina remained popular with investors as well.

In 1997, only 1% of global FDI was directed toward Africa, even though profit rates for FDI were higher there than in any other region of the world between 1991 and 1997. One factor discouraging more investment in Africa and elsewhere is the prevalence of violent conflict in many of the world's poorest countries. The U.S. State Department lists 74 countries in which the risks to physical security are high while 34 countries were experiencing civil war or rebel insurgencies in 2000. In Algeria, for instance, international oil companies devote 8-9% of their local budgets to security for facilities and personnel. Despite these obstacles to foreign investment, average annual FDI flows to the world's 44 poorest countries tripling from $1 billion for the 1987-92 period to nearly $3 billion in 1998.

The shift in the sectors targeted by foreign investors from extractive industries to manufacturing and from production for domestic consumption to exports is illustrated by data on U.S. MNC affiliates located in the Third World. Between 1950 and 1984 the share of U.S. Third World FDI located in extractive industries fell from over one half to less than 40 percent, while the proportion accounted for by manufacturing rose from 15 percent to 37 percent.  The share of exports in the total sales of U.S. MNC subsidiaries in the South grew from 8.4 percent in 1966 to 18.1 percent in 1977 and has continued to rise.  In addition to the manufacturing export sector, multinational corporations have increasingly been attracted to the Southern service industries, including banking, insurance, transportation, shipping, tourism, construction, retail sales, advertising, and telecommunications. Service industries are likely to capture an increasing share of North­South investment flows over the coming decade.

Perhaps the most important trend in Third World host country­MNC relations during recent years has been the development of new, more flexible forms of investment.  Traditionally, foreign investment entered the Third World in the form of a tightly integrated package under the ownership and control of the MNC. Elements of this package included capital, technology, managerial expertise, and marketing. Foreign investors typically resisted pressures from the host country to break up this package by allowing greater local control over various elements. Third World governments often responded by attempting to steer the behavior of foreign firms through the imposition of external legal and regulatory controls.

Out of these conflicting perspectives emerged a set of arrangements that satisfied neither party. Third World governments argued that foreign control over all aspects of investment concentrated too much economic power in foreign hands, especially in critical sectors; limited the spin-off of skills, technology, and other benefits to the rest of the local economy; and led to abuses such as those surveyed earlier in this chapter. MNCs, for their part, became increasingly frustrated by government regulations that raised costs, cut profits, and hemmed in their autonomy. The result was a standoff: Governments resorted to more-extreme measures of control, such as outright nationalization, while MNCs increasingly steered clear of new commitments in the Third World.

In recent years, however, each side has begun to abandon previously rigid positions and to seek out more-cooperative arrangements designed to reconcile conflicting interests. As we have seen, Third World governments have dismantled many of the regulatory controls that previously served to discourage new foreign investment. MNCs, meanwhile, have largely abandoned their insistence on formal ownership and control over all phases of investment, thus removing one of the concerns that prompted Third World governments to impose onerous controls in the first place.

Although the older forms of MNC investment in the Third World persist, a host of new ventures involves foreign firms as limited partners in projects often initiated and largely controlled by Third World businesses or governments. Typically, foreign firms provide only those elements of the overall project that local participants canít provide for themselves. The once-monolithic packaging of capital, technology, management, and marketing has given way to a new division of labor in which local and foreign partners perform different functions, depending upon the particular strengths they bring to the project.

These partnerships take many forms. In joint ventures, local and foreign firms team up to provide capital and management while dividing up profits. Or Third World firms may subcontract to provide components of a larger product or to carry out assembly operations for a foreign firm. In some cases, foreign firms provide the missing ingredients for a project that is predominantly controlled by Third World partners. For instance, a foreign firm may, in return for a fee, license technology to a Third World firm to be used in the production or design of a particular product. Foreign firms may also provide managers for a project that is locally owned. Turnkey contracts call for foreign firms to construct factories that are then turned over to a Third World firm for operation. Product-in-hand contracts are like turnkey contracts, except that the foreign partner also trains local managers in how to operate the plant. Finally, some Third World businesses act as franchisees, putting up the capital or paying royalties and providing management while the franchiser provides technology and trademarks along with direction in how the operation is to be run.

Malaysiaís effort to develop a domestic automobile industry provides one example of the new flexibility in MNC­host country relations. The government forged a partnership with the Japanese firm Mitsubishi to produce a small economy car called the Proton. In return for one-third ownership, Mitsubishi provided the necessary design, technology, and machinery. When difficulties plagued the plant after it opened under Malaysian management, Mitsubishi was called in to provide managerial expertise as well. The operation has become profitable and has begun to generate exports on top of healthy domestic sales.

These new arrangements satisfy many Third World concerns about foreign involvement in their economies. Much greater control is vested in local parties. This limits the potential for MNC abuses while contributing to the local accumulation of skills, knowledge, and experience. Third World governments, which often take a direct role in such ventures, gain greater say over which projects are initiated and how they are run, thus lessening the need for indirect controls and regulations. At the same time, some of the benefits that foreign investment can provide are preserved, such as access to skills and technology unavailable locally. Another benefit is less obvious. Many of the Northern firms involved in such deals are small- to medium-sized businesses and have little prior experience in Third World markets. Their growing presence opens new channels for foreign investment in the Third World and presents established MNCs with greater competition. Overall, this improves the bargaining climate for Third World countries in their relations with foreign capital.

These new ìdesigner dealsî do, however, hold potential drawbacks for the Third World. By gaining greater control, Third World governments and private firms also shoulder higher risks. When the role of MNCs is lessened, MNCs give up responsibility for assessing the wisdom of investment decisions. If a project fails, the losses are felt much more directly in the Third World itself and much less in the bottom line of MNC spreadsheets.

This shift of responsibility, risk, and uncertainty to the Third World partners is precisely what makes the new forms of involvement attractive to many MNCs. Often they profit by providing services under contract without the necessity of putting their own capital at risk. The lower profile of these new investment forms also removes the political spotlight from foreign business involvement in the Third World, lessening the prospect of populist and nationalist agitation against their presence.

MNCs and NGOs

 Even as MNC relations with host governments have generally entered a more cooperative phase, challenges to MNC conduct have arisen from another direction - transnational NGOs. In recent years, labor, human rights and environmental NGOs have become more vocal in their criticisms of MNC behavior, especially in developing countries. This phenomenon symbolizes a broader backlash against globalization that has mobilized elements of civil society in both North and South.

 Critics have accused MNCs of collusion with repressive governments in countries where they do business, the abusive treatment of workers in Third World "sweatshops," and the dumping of toxic waste and other forms of pollution in host countries. NGOs have fought these corporate practices through a variety of tactics, including consumer boycotts, shareholder protests, publicity campaigns, direct action, legal challenges and appeals to governments for new laws and regulations.

 The anti-corporate NGO movement seeks to redefine the meaning and scope of corporate responsibility. In this view, corporations have ethical obligations to workers, communities and the environment that go beyond the traditional goal of maximizing profits. Aron Cramer, the Vice President of Business for Social Responsibility, argues that "more and more, the [public] is looking at what the private sector is doing on human rights."

 One corporate response to these criticisms has been to pledge better behavior in the future. Following NGO charges that it profited from child labor and abusive working conditions in its factories abroad, for instance, the sports shoe and equipment maker Reebok agreed to allow independent monitoring to insure that its products made in poor countries are free of child labor. Reebok also constructed a school in Pakistan as part of an effort to move children from factories to school. The company has created a Reebok Human Rights Award, adopted a human rights code of conduct and funded a program to provide activists with hand-held cameras to allow them to document human rights abuses.

 The Shell Oil Company came in for a blast of negative publicity after the Nigerian government executed poet and political activist Ken Saro-Wiwa in 1995 for his protests against the environmental and human costs of Shell oil operations in southern Nigeria. Shell was accused of complicity with the Nigerian government's repression and of ignoring the environmental devastation caused by leaking oil rigs and pipelines. Since then, Shell has adopted a corporate code of conduct on human rights and provided over $30 million toward local community development in areas where it does business in Nigeria.

In response to the Nigerian case and other like it, a number of international oil and mining firms have agreed to a voluntary code of conduct dealing with human rights concerns. NGOs have pointed to numerous cases in recent years where security forces belonging to host governments or hired directly by corporations have committed human rights abuses against local peoples whose political activities were considered a threat to oil or mining investments. In response, the U.S. and British governments brought together a group of major corporations, including Freeport-McMoRan, British Petroleum, Shell, Chevron, Texaco, Conoco and Rio Tinto mining company, with a coalition of NGOs to hammer out an agreement that commits the firms to publicize and protest human rights abuses in host countries and to weed out security employees guilty of abusive behavior.

In July of 2000, Kofi Annan, Secretary General of the United Nations, presided over a meeting of 50 MNCs and 12 labor, human rights and environmental groups in which corporate representatives agreed to a voluntary "global compact" addressing issues of corporate conduct. At this meeting, number of large and well known corporations, including Bayer, Dupont, Ericsson, Healtheon , Daimler-Chrysler, Shell and Nike, pledged to support human rights, the elimination of child labor, the freedom of workers to organize into labor unions and responsible environmental safeguards wherever they do business, even when host governments have inadequate laws or enforcement mechanisms to ensure such standards.

Amnesty International and the World Wildlife Fund were among the NGOs which endorsed this "global compact." Other NGOs, including Greenpeace, refused to support the agreement on the grounds that it called upon corporations to pledge adherence to a set of vague and non-binding principles but fell short of committing the firms to a detailed code of conduct. Also, dissenting NGOs argued that the participating corporations saw the "global compact" as a means to clean up their tarnished images and to forestall stronger and more binding restrictions at the national and international levels. Some NGOs were especially critical of U.N. involvement in sponsoring the meeting, which in their view served to "bluewash" corporate misconduct.

 In other cases, corporations have fought against restrictions on their business practices abroad. In recent years, dozens of state and local governments in the U.S. have passed "selective purchasing" laws, which bar these governments from purchasing products from or investing funds in firms that do business in foreign countries whose governments have particularly odious human rights records. Similar methods were used in the 1980s to discourage MNCs from doing business in South Africa in an effort to bring an end to apartheid in that country.

 One such law was passed by the state of Massachusetts in 1996. The state government was ordered to attach a 10% penalty to bids for state contracts placed by companies that did business in Burma, whose government is widely considered guilty of serious human rights violations. Other states and local governments followed suit by passing similar legislation. Massachusetts's so-called "Burma law" was challenged in the courts in a lawsuit brought by the National Foreign Trade Council, which represents 550 major U.S. firms. Ultimately, a Federal appeals court threw out Massachusett's Burma law on the grounds that it usurped the constitutional right of the federal government to control U.S. foreign policy. This ruling has placed other selective purchasing laws around the U.S. into legal uncertainty.
 The U.S. congress itself has passed various pieces of economic sanctions legislation that restricts U.S. trade or investment with over 60 countries around the world. To combat these growing legal restrictions on the ability of U.S. corporations to do business in many parts of the world, 600 firms have formed a lobbying organization called "USA*Engage" which seeks the repeal of such legislative sanctions.

 In general, the clash between large MNCs and their NGO critics can be expected to continue and intensify in coming years, punctuated on occasion by efforts on both sides to find common ground.

Conclusions

Many MNCs make handsome profits on their Third World operations. Southern countries often benefit from the capital and know-how that accompany such investments. The potential for mutual gain has indeed perpetuated the ongoing relationship between Northern firms and Southern host governments. Yet although each party is, in varying degrees, dependent upon the other, the interests, purposes, and perspectives of MNCs and Third World states diverge in some essential respects. These differences have given rise to a history of conflict. The ìrules of the gameî governing foreign investment in various Third World countries have changed greatly over time, often in response to changes in relative bargaining power. Efforts to devise a lasting and mutually acceptable framework for MNC­Third World relations have generally produced disappointing results.

The fundamental source of MNC­Third World conflict stems from the varying attributes of the two parties. MNCs are economic entities that seek to maximize profits on a global scale. Though, in practice, FDI may contribute to the development of a host countryís economy, this is, from the firmís perspective, an incidental result, not the primary purpose of the investment. Changes in corporate practice that might maximize the benefits to a host country appeal to corporate executives only if the changes also happen to make sense in terms of overall profitabilityóa circumstance that is probably rare.

Third World states are political entities bounded by territorial borders. The principal concerns of Southern leaders are to promote economic development while also reducing their countriesí vulnerability to foreign manipulation. From the Third World perspective, MNCs represent both opportunity and threat. FDI brings economic assets that are scarce in most Third World countries. Yet in the absence of effective regulation, these assets are subject to foreign control. Decisions made outside the countryís borders ultimately determine both the economic and political effects of FDI.
MNCs would prefer a world without borders. Yet they must operate in a system of sovereign states. MNCs cannot escape the realities of fragmented political authority in the international system, but they can and do attempt to minimize the interference of national regulation on their global operations by translating their mobility, knowledge, and resources into bargaining power.

Short of outright nationalization, host states cannot alter the global or transnational character of the MNC. They can, however, use their legal and territorial control to impose regulations designed to ensure that FDI takes place on terms that further national development goals. Their ability to do so, without disrupting the stream of foreign investment, depends upon the stringency of the regulatory regime that the state seeks to impose as well as upon its relative bargaining power.
The tensions between Northern MNCs and Southern host states may tighten or relax over time. The outcomes of bargaining between them may vary as well. But the fundamental character of their relationship is likely to persist. Conflicting interests and desires will continue to weigh against the mutual dependence of firms and states upon one another, ensuring a stormy marriage between the two.

The controversial nature of MNCs and their growing role in the world economy is also underscored by the emerging conflict between large international firms and their NGO critics. The differing perspectives that divide these two sets of actors derives from fundamentally divergent assessments of the costs and benefits of globalization. Yet even here - where the boardroom meets the barricade - there exists room for negotiation among representatives from the worlds of business and civil society.

Annotated Bibliography

 Volker Bornschier and Christopher Chase-Dunn, Transnational Corporations and Underdevelopment, New York: Praeger, 1985.
A conceptual analysis of international capital flows employing world systems theoryóa school of thought that is closely related to the dependency perspective.
 Jeremy Brecher and Tim Costello, Global Village or Global Pillage, Boston: South End Press, 1995.
A radical critique of globalization and the spread of multinational corporations written for a general audience.
 Peter J. Buckley and Jeremy Clegg (eds.), Multinational Enterprises in Less Developed Countries, New York: St. Martinís Press, 1991.
A collection of theoretical and empirical essays on the role that multinational corporations play in Third World countries.
Paul N. Doremus, William W. Keller, Louis W. Pauly and Simon Reich, The Myth of the Global Corporation, Princeton: Princeton University Press, 1998.
Challenges the view that multinational corporations are "stateless" entities. Argues that MNCs remain heavily dependent upon home country economies and governments.
 Rhys Jenkins, Transnational Corporations and Uneven Development: The Internationalization of Capital and the Third World, New York: Methuen, 1987.
A comprehensive treatment of MNCs in the Third World written from a dependency perspective. Contains a wealth of data, history, and theoretical analysis.
David Korten, When Corporations Rule the World, Kumarian Press, 1996.
A critical look at corporate globalization.
 Sanjaya Lall (ed.), Transnational Corporations and Economic Development, New York: Routledge, 1993.
An excellent collection of essays, new and old, on the economic dimensions of foreign direct investment in the Third World.
 George Modelski (ed.), Transnational Corporations and World Order: Readings in International Political Economy, San Francisco: W. H. Freeman & Co., 1979.
Although dated, this reader contains a number of classic theoretical works on the politics and economics of foreign direct investment.
 Theodore Moran, ìMultinational Corporations and Dependency: A Dialogue for Dependentistas and Non-Dependentistas,î International Organization, Winter 1978.
A seminal source on the bargaining approach to analyzing MNC­host country relations.
 John Stopford and Susan Strange, Rival States, Rival Firms: Competition for World Market Shares, New York: Cambridge University Press, 1991.
Examines interfirm competition among multinational corporations and bargaining between firms and states.
Van Whiting, The Political Economy of Foreign Investment in Mexico: Nationalism, Liberalism and Constraints on Choice, Baltimore: Johns Hopkins University Press, 1991.
A detailed case study focusing on Mexican efforts to regulate foreign direct investment.