Managing Risk in Developing Countries

Managing Risk in Developing Countries: National Demands and Multinational Response

Barbara C. Samuels
Copyright Date: 1990
Pages: 272
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  • Book Info
    Managing Risk in Developing Countries
    Book Description:

    In light of the increasing global competition among both multinational companies and national economies, Barbara Samuels examines a source of economic tension that has broad social implications: as multinational companies (MNCs) strive for cheaper labor and new markets, less-developed countries (LDCs) are becoming more concerned with extracting benefits from these companies to achieve their development objectives. Samuels centers her study on the variables shaping the responses of MNCs to national demands while considering current debates on country risk, global competitiveness, and national industrial policy. Advancing a micro-view of the MNC and its host country in two case studies, Samuels shows how an MNC subsidiary's integration with headquarters and its closeness with local government affect its management of risk and its ability to deal with LDC demands. Here the author investigates the labor and investment policy changes brought about when various automotive subsidiaries interacted with national interest groups in Brazil and with the government in Mexico. Both cases illustrate how the policy response of one subsidiary creates the dynamics for defensive policy changes of its competitors. MNC managers and LDC policymakers can draw important conclusions.

    Originally published in 1990.

    ThePrinceton Legacy Libraryuses the latest print-on-demand technology to again make available previously out-of-print books from the distinguished backlist of Princeton University Press. These paperback editions preserve the original texts of these important books while presenting them in durable paperback editions. The goal of the Princeton Legacy Library is to vastly increase access to the rich scholarly heritage found in the thousands of books published by Princeton University Press since its founding in 1905.

    eISBN: 978-1-4008-5154-6
    Subjects: Business

Table of Contents

  1. Front Matter
    (pp. i-vi)
  2. Table of Contents
    (pp. vii-viii)
  3. List of Figures
    (pp. ix-x)
  4. List of Tables
    (pp. xi-xii)
  5. Acknowledgments
    (pp. xiii-xvi)
  6. List of Abbreviations
    (pp. xvii-2)
  7. CHAPTER 1 Introduction: Competing Issues—National Demands and Multinational Response
    (pp. 3-30)

    The spread of businesses across national boundaries is one of the most important phenomenons affecting our society, prompting much debate on the global competitiveness of multinational companies and national economies as well as on the sociopolitical implications. As the technological advances of communications, transportation, and production modes further cut through national boundaries, the very structure and fabric of the nation-state, international relations, and businesses are being revolutionized. Increasingly, the relevant parameters are not national but global, with national policymakers and business managers being forced to consider the impact of international variables on public policies and business strategies. Against this backdrop,...

  8. Part 1: Host-Country Group Demands and Subsidiary Response:: The Case of the Brazilian Automotive Industry
    • CHAPTER 2 MNCs within a Changing Sociopolitical Environment
      (pp. 33-56)

      Multinationals, by definition, operate in differing national environments, which due to their very nature, inevitably undergo social and political changes. Typically, the MNC faced with a changing sociopolitical environment considers only a narrow range of economic and political issues, analyzing these external factors constituting so-called country risk with a removed and generalized macro-oriented approach. This approach to analyzing industry environments is, we argue, piecemeal at best, often misleading, and represents a potential liability in the process of defining and implementing global competitive strategies. Any comprehensive analysis must be interactive and dynamic, encompassing the role of the MNC itself within the...

    • CHAPTER 3 Individual Subsidiary Response: The Reformulation of Labor Policy
      (pp. 57-76)

      Chapter 2 mapped the evolution of labor demands on the subsidiaries of automotive MNCs, showing the role of their labor policies as “levers for change” in Brazil’s transition to political liberalization. There, MNC subsidiary policies were differentiated on the basis of their role within the LDC’s development process. However, within this process, the behavior of individual subsidiaries differed—Ford do Brasilbecame the ultimate “response leader,” complying with labor’s demands, thus setting the pace for the other automotive subsidiaries and then, inevitably, for all companies throughout the country. This chapter and the next will delve into the dynamics determining individual...

    • CHAPTER 4 Determinants of Differing Subsidiary Behavior: Relationships within the Changing Labor Environment
      (pp. 77-108)

      The chronological analysis in the last chapter showed that the five Brazilian automotive subsidiaries—even though they were in the same industry and faced the same changing labor environment—behaved very differently. Each subsidiary had its own distinctive characteristics which shaped its behavior. Crisis magnified the effect of these individual characteristics on subsidiary response. However, in that analysis many questions were left unanswered. Now we must put the five subsidiaries into a comparative framework:how can their relationships further illuminate those variables that account for their differing behavior?

      This chapter continues to examine the five automotive subsidiaries, but in terms...

  9. Part 2: Host-Government Demands and Subsidiary Response:: The Case of the Mexican Automotive Industry
    • CHAPTER 5 MNCs within a Changing Regulatory Environment
      (pp. 111-135)

      The brazilian case study illustrated the arguments on MNC behavior:within a changing sociopolitical environment, MNC policies can serve as “levers for change,” with individual subsidiaries differing significantly in their behavior.However, by definition, MNCs not only operate in the fluid sociopolitical environments exemplified by the Brazilian case study, but also under the subjugation of national government regulations. The next three chapters concern MNC behavior within a changing regulatory environment. Applying these arguments to this second major type of MNC-LDC conflict will illustrate their wide applicability. Whether analyzing sociopolitical or regulatory environments, any assessment of the risks to the MNC...

    • CHAPTER 6 Individual Subsidiary Response: The Reformulation of Investment and Sourcing Policies
      (pp. 136-164)

      The last chapter showed how the Mexican subsidiaries became, as in the Brazilian case study, “levers for change”: the subsidiaries inadvertently created the conditions for escalating host-country demands that would eventually require making use of parent resources outside the host country. The Mexican government succeeded in eliciting huge investments from the world’s automotive MNCs, thus establishing Mexico as a major global source for automotive engines. Yet, the historical overview also indicated significant differences in subsidiary response to the 1977 Decree, withGeneral Motorssetting the pace, forcing competitors to follow. This chapter examines in detailhowthe MNC subsidiaries differed...

    • CHAPTER 7 Determinants of Differing Subsidiary Behavior: Relationships within the Changing Regulatory Environment
      (pp. 165-215)

      As in the Brazilian case, the Mexican automotive subsidiaries behaved differently in response to a changing host-country environment, with those differences creating significant diverse risks to the MNCs and benefits to the host country. In both cases, regardless of whether it was a local issue (labor policy) or a parent issue (investment and sourcing policy), the subsidiaries possessed distinctive characteristics that shaped their behavior. This chapter will analyze the Mexican case study following the same comparative framework outlined for the Brazilian case study:how can subsidiary relationships further explain the wide variance in individual subsidiary behavior?First, the relationship of...

    • CHAPTER 8 Conclusion: Strategic Implications for MNC Managers and LDC Groups
      (pp. 216-242)

      Both case studies contain evidence supportive of competing theories on the role of MNCs in LDCs: As the dependency school espouses, the subsidiaries were driven in some circumstances by external parent imperatives unrelated, and sometimes contrary, to the LDC’s objectives; yet, as the pro-MNCs theorists claim, subsidiaries were sometimes also engines of development establishing modernizing agendas and contributing in unique ways to those objectives. The conflicting generalizations set forth by these schools obviously contain elements of truths. However, generalizations based on a macro-oriented absolutist framework of exclusivity lead to circuitous debates without providing comprehensive pragmatic guidelines for MNC managers and...

  10. Appendix: Interviewees
    (pp. 243-246)
  11. Index
    (pp. 247-253)