“Better Together: Multinational Corporations and Domestic Business Groups in Times of Economic and Political Transitions – Evidence from Chile”
 

February 7, 2018 12:00PM Millikan Room, E53-482

This paper studies two interrelated questions. First, why did business groups in emerging markets thrive and prevailed after pro-market reforms were implemented in their countries? And, second, what type of adaptation strategies can multinational corporations develop in order to be competitive in economies dominated by business groups? By conducting an archive-based historical network analysis of business groups in Chile during a period of major economic and political transitions, we maintain that business groups were created in periods of protectionism as a way to navigate economies with strong state participation, inefficient markets, and trade barriers. In this process, these groups endogenously generated an economy with market imperfections resulting from the dominance of these business groups. This means that the transition towards more open markets did not necessarily create more competitive environments and that elites in emerging economies are not willing to abandon the advantages of having links between their businesses. Multinationals entering this economy adapted by becoming business groups themselves and creating links with other business groups. As a result, strategies devised as means to reduce market imperfections created new imperfections benefitting both the business groups and the multinationals.

Latin American Working Group