The Importance of Institutional Knowledge for Expats Working in Latin America

Daniel Friel

doi:10.46697/001c.16824

Abstract

This article contends that the training of expats should include explanations of how critical institutions shape the ability of multinational corporations to transfer best practices to their foreign subsidiaries. It illustrates the importance of this topic by examining why an Argentine company failed in Brazil because it did not understand how critical differences between labor laws and supplier relations between this country and Argentina. By contrast, the French company was successful in Brazil and Argentina because it understood how it had to adapt its lean production program to the particularities of industrial and employee relations in these countries.

Highlights

Firms from the developed world operating in emerging markets confront a variety of challenges in adapting their operations to the institutional contexts in these countries
This article uses the varieties of capitalism framework to explore major institutional differences between Argentina and Brazil by examining how an Argentine and a French MNC attempted to implement best practices in each of these countries. The former company failed in Brazil because the practices that proved critical to the success of this firm in Argentina could not be adapted to employee relations and relations with suppliers in that country
Best practices transferred from one country to another often prove ineffective because they do not suit the institutions of the receiving one (Ansari, Fiss, & Zajac, 2010)

Summary

Introduction

Firms from the developed world operating in emerging markets confront a variety of challenges in adapting their operations to the institutional contexts in these countries. This article suggests that the varieties of capitalism framework is a more appropriate means for understanding this topic because it focuses on how organizational practices are shaped by institutions It compares five critical institutions, namely governance, industrial relations, training and education, supplier relationships and employee relations, across nations (Hall & Soskice, 2001). This article uses the varieties of capitalism framework to explore major institutional differences between Argentina and Brazil by examining how an Argentine and a French MNC attempted to implement best practices in each of these countries The former company failed in Brazil because the practices that proved critical to the success of this firm in Argentina could not be adapted to employee relations and relations with suppliers in that country. If institutions in these areas were weak or missing in these countries, as presumed in the institutional voids framework, no adaptations would not have been necessary

Institutions and Best Practices in Emerging Markets

Findings

Conclusion and Ramifications