Aim: This study assesses how sustainability framing shapes municipal bargaining capacity and community acceptance in small municipalities engaging with foreign direct investment (FDI).

Methodology: This study examines how small municipalities negotiate local legitimacy while attracting foreign direct investment (FDI) framed as ‘sustainable’. Using a qualitative case study of Älvkarleby (Sweden), the study analyses 12 semi-structured interviews and one written stakeholder response, complemented by on-site observations. Drawing on Institutional Theory, Resource Dependence Theory, and Place Leadership, the study shows how sustainability operates simultaneously as a source of legitimacy and a site of tension: coercive regulatory requirements and normative expectations encourage ‘green’ framing, while local resource constraints (labour, grid capacity, financing, land) and community concerns shape municipal bargaining dynamics.

Findings & Conclusion: The findings demonstrate that sustainability is not solely an environmental or economic objective but a relational and political process through which legitimacy is constructed and contested at the local level. Normative institutional pressures shape expectations regarding investor behaviour, engagement, and long-term commitment, influencing how legitimacy is granted. While sustainability-oriented narratives enhance municipal attractiveness, asymmetric resource dependencies reduce local bargaining power. Place leadership plays a critical role in mediating these tensions by coordinating actors and aligning external investment pressures with local priorities.

Contributions & Future Research: The study contributes to research on sustainable FDI by highlighting interactions between institutional pressures, resource dependencies, and place-based leadership in small municipalities. Future research could adopt comparative or longitudinal approaches.

Key Words: Municipal Attractiveness, Local Bargaining Power, Resources, Sustainable Foreign Direct Investment (FDI), Sustainability Governance, Community Acceptance