Conflicts Between Host Countries and the Multinational Enterprise

by R. Mason

Fall 1974

Volume 17
Issue 1

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Host countries differ in the degree of apprehension they display toward direct foreign investment and hence toward the multinational firm. The larger and more visible the firm, the greater is the apprehension likely to be. There are also sectoral differences. Investments in primary production and utilities are viewed differently than those in manufacturing and trade. Countries have growth aspirations and look to the industrial sectors as a source of growth and economic transformation. They seek the dynamic growth effects that foreign investors can bring. When these effects are absent, as they may be in technologically mature industries, there will be pressure to remove or reduce the foreign presence. Investments also have allocative, distributive and balance of payments effects whose costs in relation to benefits may be considered intolerable. When they are, governments will treat foreign controlled investments differently than they treat locally controlled ones. Often foreign investors become dominant in high priority sectors where incentives to invest are offered.

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