National Income Inequality, Society, and Multinational Enterprises

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Author(s): Nathaniel C. Lupton (University of Lethbridge, Canada), Guoliang Frank Jiang (Carleton University, Canada)and Luis F. Escobar (University of Lethbridge, Canada)
Copyright: 2018
Pages: 23
Source title: Geopolitics and Strategic Management in the Global Economy
Source Author(s)/Editor(s): Angelo Presenza (University of Molise, Italy)and Lorn R. Sheehan (Dalhousie University, Canada)
DOI: 10.4018/978-1-5225-2673-5.ch011

Keywords: Business & Management / Business Science Reference / Economics and Economic Theory / Global Business

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Abstract

This chapter calls for understanding the perspective of multinational enterprises (MNEs) on international differences in income inequality. The authors set a research agenda on how national differences in income inequality influence MNE expansion strategies. Applying a transaction cost framework, both negative and positive economic outcomes of income inequality, from the MNE's perspective, are identified. Low levels of income inequality may deter foreign investment, as MNEs prefer countries where they incur lower levels of transaction costs arising from interactions with various market and non-market actors. However, the positive effect of income inequality on location attractiveness will likely diminish at higher levels of inequality when benefits are increasingly offset by additional monitoring, bargaining and security costs owing to instability and conflict. The chapter further explores the implications for level of MNE equity applied in the choice of entry mode under different levels of income inequality.

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National Income Inequality, Society, and Multinational Enterprises

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