Abstract
An integrated approach to explaining how multinational enterprises (MNE) select ownership structures for subsidiaries is proposed. The approach integrates 2 previously proposed approaches: 1. MNEs prefer structures that minimize the transaction costs of doing business abroad. 2. Ownership structures are determined by negotiations with the host government, and the outcome depends on the MNE's bargaining power. Statistical analysis is used to separate the effects of the 2 approaches within the integrated approach. The results support one of the more important hypotheses of the bargaining power approach, which holds that attractive domestic markets increase the relative power of host governments. The analysis does not support other hypotheses of this approach, such as those predicting that firms in marketing and research and development (R&D)-intensive industries will have more bargaining power than others. The results also show that relatively large firms and firms with high intrasystem sales are more deterred by government ownership restrictions.