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Bargaining with Multinationals: Why State Capacity Matters

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  • Caner Bakir

Abstract

Dominant models of bargaining between states and multinational corporations (MNCs) have widely held that bargaining relations, especially in high-technology manufacturing, have changed from confrontational to cooperative. It is consequently argued that there is little formal entry bargaining among these actors. However, there are three primary weaknesses in this literature. First, the understanding of outcomes is limited to the terms of investment agreements. This static view ignores the dynamics of bargaining processes and decisions not to invest, which also deserve explanation. Second, it is MNC-centric, ignoring state's privileged role in relation to the governance of entry bargaining in domestic policy-making processes. Third, it views state as a monolithic entity, ignoring the bargaining that occurs inside states. To redress these issues, this article offers a state-centric bargaining model. It identifies administrative and institutional capacity as two critical components of state capacity. It chooses the entry bargaining from 2005, when Hyundai Motors Corporation considered establishing a USD1.5 billion car-manufacturing plant in Turkey. It shows that state capacity in the governance of a domestic policy-making process affects the outcome of entry bargaining: When state capacity is weak, an MNC's decision not to invest is a more likely outcome.

Suggested Citation

  • Caner Bakir, 2015. "Bargaining with Multinationals: Why State Capacity Matters," New Political Economy, Taylor & Francis Journals, vol. 20(1), pages 63-84, February.
  • Handle: RePEc:taf:cnpexx:v:20:y:2015:i:1:p:63-84
    DOI: 10.1080/13563467.2013.872610
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    References listed on IDEAS

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    1. Wolfgang H. Reinicke, 1995. "Banking, Politics And Global Finance," Books, Edward Elgar Publishing, number 367.
    2. Nicholas Phelps & Philip Raines (ed.), 2003. "The New Competition for Inward Investment," Books, Edward Elgar Publishing, number 2500.
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    Cited by:

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    2. Andrea Éltető & Katalin Antaloczy, 2017. "FDI promotion of the Visegrád countries in the era of global value chains," IWE Working Papers 229, Institute for World Economics - Centre for Economic and Regional Studies.
    3. Finér, Lauri & Ylönen, Matti, 2017. "Tax-driven wealth chains: A multiple case study of tax avoidance in the finnish mining sector," CRITICAL PERSPECTIVES ON ACCOUNTING, Elsevier, vol. 48(C), pages 53-81.
    4. Gamso, Jonas & Nelson, Roy C., 2019. "Does partnering with the World Bank shield investors from political risks in less developed countries?," Journal of World Business, Elsevier, vol. 54(5), pages 1-1.
    5. Coban, Mehmet Kerem, 2020. "Diffuse interest groups and regulatory policy change: Financial consumer protection in Turkey," OSF Preprints f6t5y, Center for Open Science.

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