Students of international negotiations often examine strategic interactions among a given set of parties dealing with a specified group of issues. The issues and parties themselves are often choice variables whose ultimate configuration can have decisive effects on a bargain's outcome. Using a variety of international cases, I investigate the properties of several classes of moves that are intended to alter the issues and parties of an original negotiation. A unified approach to the analysis of such situations suggests numerous distinct means by which the “addition” or “subtraction” of issues can yield one-sided gains to the use of power; can yield joint gains that create or enhance a zone of possible agreement; and can reduce or destroy a zone of possible agreement. The effects of adding or subtracting parties are similarly analyzed. However, unintended complexity, unforeseen interrelationships, organizational considerations, transactions costs, and informational requirements may alter the analysis of such moves.

Negotiation arithmetic: adding and subtracting issues and parties

The bargaining power model of HC–MNC (host country–multinational corporation) interaction conceives of economic nationalism in terms of rational self-interest and assumes both inherent conflict and convergent objectives. In extractive industries, there is strong evidence that outcomes are a function of relative bargaining power and that as power shifts to developing HCs over time, the bargain obsolesces. A cross-national study of the bargaining model, using data from 563 subsidiaries of U.S. manufacturing firms in forty-nine developing countries, indicates that while the bargaining framework is an accurate model of MNC–host country relationships, manufacturing is not characterized by the inherent, structurally based, and secular obsolescence that is found in the natural resource industries. Shifts in bargaining power to HCs may take place when technology is mature and global integration limited. In industries characterized by changing technologies and the spread of global integration, the bargain will obsolesce very slowly and the relative power of MNCs may even increase over time.

https://www.cambridge.org/core/services/aop-cambridge-core/content/view/S0020818300027624

Testing the bargaining hypothesis in the manufacturing sector in developing countries

When an investor, for example a transnational corporation, invests abroad it runs the risk that its investment will be expropriated for the simple reason that international contracts are practically impossible to enforce. Any agreements or contracts then undertaken by the transnational company and the host country must be designed to be self-enforcing. It could be possible for the host country and the transnational corporation to find such self-enforcing agreements if there are future gains from trade. Thus although the host country might have a short-term incentive to expropriate, it has a long-term incentive to foster good relations with potential investors to attract more investment in the future. This conflict between short-term and long-term incentives determines the type of investment contracts agreed. This paper extends previous work on the general underprovision of investment when contracts are incomplete or only partially enforceable (see e.g. Grout (1984)) to a dynamic context. It is likewise shown that investment is initially underprovided but it increases over time and for certain parameter values it tends to the efficient level. The expected future discounted returns to the transnational company decline over time, extending Vernon's observation of the obsolescing bargain (Vernon (1971)). The model is also extended to allow for capital accumulation and consideration is given to renegotiation-proof contracts.

/pdf/foreign-direct-investment-and-the-risk-of-expropriation-17jk88ho2j.pdf

Foreign direct investment and the risk of expropriation

Peasant Wars of the Twentieth Century

Military coups in Argentina, Brazil, and Chile in the 1960s and 1970s cast doubt on the liberals' belief that democracy and economic development are mutually reenforcing. Indeed, Guillermo O'Donnel...

The Affinity of Foreign Investors for Authoritarian Regimes

The authors explore the often conflictual bargaining relations between transnational corporations and host governments of less developed countries. They focus particular attention on the conflict that surrounded the creation of the Mexican automobile industry (1960–1964), criticizing and reformulating a current approach to these issues. The argument proceeds in two parts—agenda setting and bargaining power. Each part is organized around a central criticism of the bargaining power approach and provides an alternative formulation which is then applied to an analysis of the bargaining relationship between the Mexican Government and the transnational automobile corporations.

/pdf/agenda-setting-and-bargaining-power-the-mexican-state-versus-27sw2vlnk1.pdf

AGENDA SETTING AND BARGAINING POWER: The Mexican State versus Transnational Automobile Corporations

There is a growing body of evidence to demonstrate that the Mexican state that was consolidated in the wake of the Mexican Revolution deliberately created and has continued to nurture a national bourgeoisie which has been a major force in the spectacular economic growth (the "Mexican miracle") of the past four decades, growth that has had little or no benefit for-indeed some argue was built on the backs of-the Mexican lower classes.' And yet, paradoxically, the capitalists that have so benefited rarely view the activities of the Mexican state with more than suspicion, and often portray it as their principal enemy--or perhaps not so surprisingly. Hardly limiting itself to mere infrastructure investments or the provision of investment incentives, the Mexican state has itself emerged as the major banker and entrepreneur in the economy. Its own enterprises have preempted private-sector savings to finance public investment; they have closed off opportunities for private investment; and they enjoy special advantages in sectors where public and private forms compete. Even in comparison with other major Latin American countries, the Mexican state has been atypically and forcefully interventionist in its national economy, particularly with regard to the scope of its involvement in the manufacturing sector.2 These two seemingly opposed views of the Mexican state are both factually accurate and reconcilable under the following thesis: Following on the Revolution, the Mexican state came to take on the role of making capitalism work for Mexico, and, in the context of Mexico's being a dependent, late-starting industrializer, this task required, for any degree of success, both major restrictions on the demands of the lower classes and the forceful entry of the state into areas of the economy where the private sector was unwilling or unable to enter, or had entered and failed. The central question of this article addresses part of this thesis: Why has the state emerged as the major banker and entrepreneur in Mexico's economy?3

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The State As Banker And Entrepreneur: The Last-Resort Character Of The Mexican States Economic Intervention, 1917-76

Export promotion has replaced import substitution as the orthodox strategy for economic development. In sectors dominated by transnational corporations, however, such a strategy may run afoul of difficulties not immediately apparent from the neo-classical comparative-advantage perspective that has provided its principal theoretical support. Evidence from the Mexican automobile industry shows that an export promotion policy may face problems of a) demand rigidities in TNC intracompany transfers, b) decision dependency, c) difficulties in enforcing sanctions in cases of recalcitrance, and d) an unequal distribution of benefits between foreign-owned and domestically-owned firms.

/pdf/transnational-corporations-and-the-political-economy-of-5bahheltxe.pdf

Transnational Corporations And The Political Economy Of Export Promotion: The Case Of The Mexican Automobile Industry

Political Science within the Liberal Arts: Towards Renewal of Our Commitment.

https://www.cambridge.org/core/services/aop-cambridge-core/content/view/F877164FA5B3090CF2C080F517EDF26C/S0003055400253999a.pdf/div-class-title-span-class-italic-the-new-bourgeoisie-and-the-limits-of-dependency-mining-class-and-power-in-revolutionary-peru-span-by-david-g-becker-princeton-n-j-princeton-university-press-1983-pp-xxviii-419-35-00-cloth-9-95-paper-div.pdf

The New Bourgeoisie and the Limits of Dependency: Mining, Class and Power in “Revolutionary” Peru . By Becker David G.. (Princeton, N.J.: Princeton University Press, 1983. Pp. xxviii + 419. $35.00, cloth; $9.95, paper.)

Douglas C. Bennett

Papers

AGENDA SETTING AND BARGAINING POWER: The Mexican State versus Transnational Automobile Corporations

The State As Banker And Entrepreneur: The Last-Resort Character Of The Mexican States Economic Intervention, 1917-76

Transnational Corporations And The Political Economy Of Export Promotion: The Case Of The Mexican Automobile Industry

Political Science within the Liberal Arts: Towards Renewal of Our Commitment.

The New Bourgeoisie and the Limits of Dependency: Mining, Class and Power in “Revolutionary” Peru . By Becker David G.. (Princeton, N.J.: Princeton University Press, 1983. Pp. xxviii + 419. $35.00, cloth; $9.95, paper.)