Are Latin American business groups different? An exploratory international political economy perspective

What is it about?

Analysis of how the local environment affects business performance in emerging economies usually considers the most important influences to be at the national level; for example institutional quality or national culture. We consider instead regional factors, proposing that shared history, politics and geography can also create conditions that characterise a region's development, and in so doing, influence international competitiveness. Our case is the Monroe Doctrine, a security arrangement between the US and all the countries of Latin America. We suggest that this political structure created power asymmetries between the United States and the countries in Latin America, which in turn restricted each states’ capacities to foster their own industrial development, and therefore limited firms's competitive capabilities and international performance. We test these ideas on a huge sample of emerging economy firms, focusing on the relative performance of business groups in exporting. We find preliminary evidence for our view in that, taking firm and country specific characteristics into account, business group affiliates in Latin America export less than those from other emerging economies, and also export less than non-affiliates. Our analysis suggests that political economy factors that operate at the regional level should be taken into account when considering MNE performance.

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