International Journal of Business and Economics Volume 19, No. 1 June, 2020

Government, MNEs and Industry Development: A Perspective of Game Theory

Taotao Chen

School of Economics and Management, Tsinghua University, Beijing

Afonso Fleury

University of São Paulo, São Paulo

Maria Tereza Fleury

Fundacao Getulio Vargas, São Paulo

Xiao Chen

School of Economics and Management, Tsinghua University, Beijing

Abstract

This study analyzed the roles of government and MNEs in industrial development through the perspective of game theory based on the case of Brazilian automobile industry. First, we have confirmed that government and FDI could have positive effects on industrial development through a dynamic game process. Second, we confirmed the roles of import-substitution for establishing and export-promotion policy for upgrading industry in the context of dynamic game. Furthermore, we stressed some policies such as further opening-up, which was always neglected in static analysis. Third, we found that the bargaining power of the government primarily came from the advantages of the local market. The conclusion we explored may have the policy implication for developing countries especially for those who have huge local markets.

Keywords：business-government negotiation, inward FDI, MNEs, industrial development and growth, game theory.

JEL Classifications：M16, M21.

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