MNE-NGO-Host Government Relationships in the Escalation of an FDI Conflict

Increased interaction among multinational enterprises (MNEs), host governments, and nongovernmental organizations (NGOs) has made the implementation of foreign direct investments (FDIs) more complex and potentially more prone to conflict. In this article, by drawing on a longitudinal case study of a conflict concerning a multinational forest industry company's pulp mill investment in Uruguay, the authors argue that specific characteristics of the relationships between MNEs, host governments, and NGOs contribute to the escalation of FDI conflicts. When escalated, the conflict has specific effects on these relationships, which effectively prevent the parties from finding a solution to the conflict. Our findings highlight the importance of accurate, prompt responses to NGO demands, and warn against considering the host government as the only source of external legitimacy.