Regulating the entry of multinational enterprises: Models and practices

Abstract

This paper examines the policies adopted by host governments to regulate the entry of multinational enterprises (MNEs). The conflict between host governments and MNEs over the choice of entry strategies is demonstrated. The theoretical underpinnings of host governments’ regulations on MNEs’ entry are provided and the restrictive policies adopted by host governments are assessed. In general, prohibiting an MNE to sign a licensing agreement with its own partially owned subsidiary generates a higher level of national welfare. If the size of the host market is large enough to support several efficient plants, encouraging MNEs to license their technologies to several local firms will also increase national welfare.