Strategic alliances as a corporate response to protectionism: The case of the Japanese semiconductor industry in the late 1980s

Abstract

This paper offers theoretical justifications and empirical evidence for the claim that multinational firms employ strategic alliances to defuse protectionist threats in their export markets (Cowhey and Aronson 1993). Strategic alliances can be an effective response when tariff‐jumping foreign direct investment (FDI) does not diffuse protectionism in the host country. Although tariff‐jumping FDI creates new allies (such as workers) in the host country, it does not offer any benefits to host country firms, which, as a result, will continue to press for protection. If multinational firms expect the host country government to give in to such protectionist pressure, they may turn to strategic alliances which, unlike FDI, give direct benefits to host country producers. On receiving such benefits, host country producers are expected to moderate their protectionist demands. The paper finds empirical support for this theory in the alliances of Japanese semiconductor firms in the late 1980s.