The bargaining view of government–business relations

The idea that relations between international companies and national governments can usefully be viewed as a bargaining situation is not new in the international business literature. If we limit the history of business analysis to just post-Second World War writings, then the focus on these relations probably began with someone such as Stephen Hymer (1960), who looked at multinational firms as institutions that internalize transactions costs (efficiency) and at the same time seek to dominate markets through monopoly power (equity). He did not relate the former issue to dealings with governments, but he certainly did consider the second issue, arguing that powerful international firms can pursue monopolistic goals, unless they are constrained by governments. While his perspective was ultimately critical of multinational firms, his focus included the key relationship of concern here, between national governments and international firms. Another author writing at the same time was Jack Behrman (1960, 1962), who explored the use of foreign direct investment as a tool for economic development, and who recommended government policies to stimulate this activity. Behrman's work was far more policy oriented, with emphasis on explaining the phenomenon of foreign direct investment, and on how governments could channel (encourage) that activity to pursue development goals. Behrman clearly focused on the interests of firms and the interests of governments, and on the ways in which they could pursue mutually acceptable goals.