Hidden Threats and Overlooked Solutions: Unnoticed Risks and Firm Action in Latin America

Abstract

Work on institutional distance has documented a number of challenges that multinational corporations face when they begin operations in distant countries. Although it has also focused principally on how socio-political risks generated by the difficulties can be mitigated by political ties, the manners in which local firms address these problems has been overlooked. At the same time, scholars in this field have not fully documented the array of socio-political challenges firms face. The field of international business needs theories that go beyond those based on new institutional economics to discover new sources of risk and how they are mitigated. I argue that the varieties of capitalism approach provides the proper framework for undertaking this type of work. I use this approach to examine how an Argentine multilatina developed a network organizational structure that effectively mitigated these risks in inter-firm relations and finance in Argentina and failed to mitigate such risks in the areas of inter-firm relations and employee relations in Brazil. I also coin the term indigenous assets to describe the type of knowledge MNEs need to acquire before entering new countries. This article concludes by explaining the relevance of its findings for theory and praxis.