Published by:
Harvard Business Publishing
Length: 8 pages
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Abstract
In an effort to retain more corporate earnings, exercise more managerial control, and meet demands of local constituents, governments worldwide are seeking greater domestic ownership of foreign subsidiaries within their borders. A study of corporate responses to India''s Foreign Exchange Regulation Act of 1973 (FERA) shows that multinational corporations facing forced equity dilutions have at least four strategic options available: strict compliance, exit, negotiation, and preemptive action. Certain practical considerations limit management''s strategic options: the implications of setting a precedent, the corporation''s decision-making structure, the level of bargaining power, the political climate, and management''s own biases.
About
Abstract
In an effort to retain more corporate earnings, exercise more managerial control, and meet demands of local constituents, governments worldwide are seeking greater domestic ownership of foreign subsidiaries within their borders. A study of corporate responses to India''s Foreign Exchange Regulation Act of 1973 (FERA) shows that multinational corporations facing forced equity dilutions have at least four strategic options available: strict compliance, exit, negotiation, and preemptive action. Certain practical considerations limit management''s strategic options: the implications of setting a precedent, the corporation''s decision-making structure, the level of bargaining power, the political climate, and management''s own biases.