The threat of expropriation creates an incentive for the multinational firm to minimize inventory holdings and to bring in goods only as needed.

Question

Quizplus · Accepted Answer

The threat of expropriation, which is when a government seizes privately owned property without compensation, can create uncertainty for multinational firms operating in that country. This can lead to the firm minimizing inventory holdings and only importing goods when they are needed to reduce the amount of assets that could potentially be taken by the government.

The Threat of Expropriation Creates an Incentive for the Multinational