Enron the Case of India

Conflict and resolution: avoiding political and legal pitfalls—the case of Enron in India

Dr. Frank L. Bartels School of Business, James Cook University

CASE STUDY

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The Economist, 21 April 2001, p. 57.

Introduction

This case focuses on the international market environment and political behaviour—particularly, the dynamic and conflictual co-existence of Corporations and States—within national regulation of the impacts of Multinational Enterprises (MNEs). Firstly, modern relations between MNEs and governments have evolved through four distinct eras: domination by MNEs (1945– 1960s); confrontation by governments (1960s–1970s); accommodation (1980s); and contention to appropriate gains from MNEs activity (1980s–1990s and beyond). Secondly, ‘the rivalry between states and the rivalry between firms and the rivalry between states and firms for a secure place in the world has become much fiercer, far more intense’ (Stopford et al, 1991, p. 1). Thirdly, ‘Transnational Corporations have become central organisers of (global) economic activities’ (UNCTC, 1992, p. 1). The balance between the two predominant perspectives on international engagement—interdependency between the firm and economic environment, and interdependency between the firm and political-legal environment—is tilting in favour of the latter. This defines areas and sources of conflict visible in the involvement in India by ENRON Development Corporation (EDC). India represents market environment extremes in which MNEs encounter—‘a land of indescribable complexity and contrast’ (Thomas and Philip, 1994, p. 92) In viewing the case, two perspectives are cogent:

Furthermore, firms entering the global game of Foreign Direct Investment (FDI) and foreign market servicing face cultural adjustment costs. Therefore, given the ‘flagship’ nature of a market access investment with strategic salience, as the biggest investment project since Indian economic liberalisation, ENRON should have developed and...