Abstract
This paper aims to analyze the interactions between home country governments and Developing Country Multinational Companies (DMNCs). Drawing on evidence from the Brazilian political environment and Brazilian multinationals we investigate the mechanisms governments use to influence the internationalization process of domestic companies and firms' political strategic responses to shape the political institutional environment in which they operate. We argue that foreign direct investment (FDI) outflows from developing economies need to be explored given specific country level contextual factors, such as high levels of government involvement. Our main findings support this idea and indicate that home country governments use a series of formal and informal mechanisms in order to drive the international expansion of DMNCs in both the entry and consolidation phases. Moreover, DMNCs political behavior in the home country political environment accounts for an important part of their strategy to develop political resources and obtain above average returns from governmental benefits.
Highlights
This paper aims to analyze the interactions between home country governments and Developing Country Multinational Companies (DMNCs)
We intent to explore how the political component embedded in international business activity has an influence in such choices and impacts DMNC entrance in new markets, a subject that has been only marginally discussed by International Business (IB)
The first section considers the influence of the Brazilian government in the internationalization process of Brazilian multinational corporations’ (MNCs) and describes ways of government’s influence considering the institutional channels of dialogue between firms and governments and their level of formality
Summary
This paper aims to analyze the interactions between home country governments and Developing Country Multinational Companies (DMNCs). Recent interest in understanding the internationalization of DMNCs was motivated by a systemic change in global FDI flows. DMNCs have special particularities that influence their international strategies. They are generally state-owned or recently privatized companies organized in business groups, which together accounted for a third of the emerging world’s foreign direct investment in the period of 2003-10, according to data from UNCTAD (2012); they have adopted distinctive approaches to internationalization (Goldstein, Bonaglia, & Mathews, 2006); and developed a symbiotic relationship with governments (Schneider & Soskice, 2009). FDI outflows from developing countries should be understood considering contextual factors such as high levels of government involvement, industry structures, ownership patterns, and business law enforcement (Wright, Filatotchev, Hoskisson, & Peng, 2005)
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