On MNC-Host Government Relations: How Finnish Firms Respond to National and Regional Policies in ASEAN

Abstract

Combining literature from international political economy, international business, and institutional approaches to business studies, this article discusses foreign firms' relationship with the public sector in Southeast Asia. It focuses on the perceptions of the firms on host country policies toward foreign direct investments (FDI) and the impact of global financial crises and regional economic integration on the firms' strategies. The multinational company (MNC)-host government relationship is seen as a cooperative and continual bargaining within a specific institutional framework. Based on interviews with managers of subsidiaries originating from Finland, it is found that the regulatory environment of Association of Southeast Asian Nations (ASEAN) countries varies from easy to difficult with regard to policies, bureaucracy and protectionism. These pose institutional constraints for the firms, with additional economic constraints caused by global financial crises. Contrary to expectations, the ASEAN free trade agreement does not figure in the firms' investment strategies. This is explained by three findings: most of the firms serve the domestic host country market; the firms operate global rather than ASEAN-wide regional production chains; the firms represent industries that are not typical in Southeast Asian regional production networks.