Governments are able to manipulate economic transactions in order to achieve foreign policy goals. This article addresses the question: can managers of multinational enterprises (MNEs) structure economic transactions in ways that will limit the costs resulting from government intervention? Using a transaction cost framework, the efficiency of alternative structures (exporting, joint ventures, licensing, or wholly owned subsidiaries) for protecting a firm's interests are assessed. We argue that the traditional focus on the dyadic relationship between supplier and buyer misses sources of transaction costs; by conceptualizing economic transactions as embedded in a political context, additional sources of transaction costs are revealed. We examine three cases of home government intervention in US MNE transactions with the Soviet Union. We find that the full range of structural alternatives is affected by government sanctions, although sanctions are imposed on exporting relationships first and removed last. We find that MNEs are, therefore, beginning to insulate international transactions by making their overseas subsidiaries more independent of US technology and supplies with the hope that the US government will be less likely to impose its will extraterritorially by intervening in foreign subsidiaries' private economic transactions.
The identification of an effective political strategy is of particular importance to firms seeking protection from import competition. The firm's fundamental choice is whether to lobby the Congress or directly petition the International Trade Commission (the primary agency for administering trade protection). In this article we summarize a debate in the political science literature regarding the extent to which federal agencies respond to short-term changes in congressional preferences. Using this literature as a basis, we develop a model to test whether International Trade Commission (ITC) decisions in escape clause cases reflect the preferences of Congress at the time the petition is filed. The results suggest that the ITC acts independently from immediate changes in congressional preferences. We conclude thatfirms seeking protection from import competition would be advised to commit resources to strengthening the evidence in their petition rather than to directly lobbying congressional representatives with the expectation that the Congress will influence ITC decisions.
This study investigates the effect that membership in a financial keiretsu has on the export performance of Japanese manufacturing companies. Companies that belong to one of the six major financial keiretsu are found to have lower export ratios than similar companies who are not members. The negative effects of keiretsu membership appear confined to producer goods companies where intergroup linkages such as preferential trading relationships are tightest. Additional evidence from the producer goods sector showing that keiretsu members do less well on other measures of company performance supports the argument that the cartel-like properties sometimes ascribed to the keiretsu actually reduce competitiveness, thus dampening export performance. In general, the data do not support recommendations that non-Japanese companies might look to keiretsu-type alliances as an organizational strategy that will lead to competitive advantage in global markets.
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