Declining Risk, Market Liberalization and State-Multinational Bargaining: Japanese Automobile Investments in India, Indonesia and Malaysia

corporations (MNCs) , by their organizational structure and operations, have profoundly shaped the world economy over the past five decades. As noted by Raymond Vernon, prior to World War II terms such as multinational or transnational were seldom used to describe international economic relations. However, by the mid-1990s, the aggregate sales of the subsidiaries of all multinational corporations exceeded total world exports.1 Paralleling the MNCs are nation-states that are the principal agents responsible for the organization of political and social life in a given society. The mutual interplay of the two has been a central concern that has occupied the attention of theoreticians as well as policy-makers.2 Analysts often observe that host countries can offer foreign investors access to new markets, resources, and factor endowments endemic to each society. On the other hand, multinational enterprises possess enormous capital, managerial expertise and innovative technology that can contribute to the developmental goals of a country. The expansion of multinational activity across borders and host country policies designed to attract, screen and control prospective investors invariably entails a process of bargaining and negotiation. In the state-MNC literature, most theoreticians have analyzed bargaining power by looking at the resources or unique characteristics of the actors. Dependency writers have historically argued that MNCs are the organizational embodiment of international capital whose operations undermine the developmental goals of local economies.3 According to this line of reasoning,