The bargaining relationship between foreign mnes and host governments in latin america

The relationship between international firms and national governments can usefully be understood in terms of bargaining theory. This article develops an explicit model of the bargaining relationship, using the level of regulation as a measure of bargaining power. The model is tested with data from a survey of multinational enterprise subsidiaries in seven Latin American countries. The evidence supports hypotheses that (1) firms are less regulated when they are technology-intensive, when they operate larger scale affiliates, and when they export more from the local affiliate; and (2) firms are more regulated when they operate in larger countries and when they have a larger local market share. These findings demonstrate the importance of the government—business relationship as a multidimensional process and offer support for the explicit framework employed here.