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

Question

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The threat of expropriation can make a multinational firm cautious about investing in inventory in certain countries as there is a risk of losing those investments in the event of nationalization. As a result, the firm may bring in goods only as needed, minimizing inventory holdings.

The Threat of Expropriation Creates an Incentive for the Multinational