A firm's lack of ability to leverage comparative advantage and the absence of competitive pressure within a smaller economy are two factors that diminish a firm's bargaining power in FDI.
Two factors indicating that a firm has little bargaining power when considering Foreign Direct Investment (FDI) in a nation include a lack of ability to benefit from comparative advantage and the absence of pressure from competitive firms within the smaller economies. If a firm cannot leverage comparative advantage, it will struggle to compete in international trade by not being able to specialize in productions where it holds efficiency. Additionally, with fewer competitive firms, there is less incentive to provide desirable goods and services at competitive prices, diminishing a firm’s leverage in negotiation.