Theoretical Implications of the Sources of Power for MNEs and Host Governments

Abstract

A long research tradition considers the role of “power” in the relationship between multinational corporations (MNC) and host country governments. However, major theories emphasize different sources of power, leaving open room for misinterpretation or discounting the role of power in the relationship. We outline the sources of power applied when studying the MNC-host government relationship and use examples, Intel’s investment in Costa Rica and Huawei’s relationship with governments in the US and Europe, to illustrate how the sources of power differ, sometimes radically, and how this translates into actions and reactions by MNCs and host governments. Drawing upon these insights, we propose a dyad-level framework for understanding power, which enables cross-theoretical comparisons, higher breadth and depth of consideration, and offers scholars and managers a deeper understanding of the power relationship between MNCs and host governments.