This study explores the struggle for gains from direct investment between multinationals and developing countries. Its purpose is to explain differences in taxation and nationalization between countries, and to consider how direct investments can best contribute to social welfare worldwide. Using game theory models, and taking into account that the developing countries also compete with each other to attract investors, it is shown that policies which manipulate behaviour do not normally distort direct investments, whilst policies that interfere with ownership do. It also demonstrates that...