Credible enticements: can host governments tailor multinational firms' organizations to suit national objectives?

The effect of goverment policy inconsistency on multinational corporations (MNCs) and their relationships with external supply networks was analyzed. Results showed that policy inconsistency raises fear of demand of new contracts by suppliers due to fears of unexpected losses of funding. This event led to transaction cost disadvantages that strain the relationship between the multinational corporations and their local suppliers. Hence, local transactions by MNCs were found to be dependent on the objectives of the host government that the MNCs have not even agreed upon.