The Trajectories of UK-owned Operational Divisions in Brazil

Sergio Rezende, 2001

In this thesis we examine the trajectory of operational divisions of multinational firms in a foreign market. Our theoretical framework combines conceptual notions from the literature on foreign market entry, internationalisation processes and subsidiary development. Our focus is on the trajectory of operational divisions, defined as a sequence of servicing modes. We define servicing mode as the institutional arrangement through which the firm services foreign markets. It is a combination of degree of localisation and externalisation of activities in a host country as well as the degree of integration of activities across countries in a multinational firm. This indicator is sensitive to both changes in the pattern of activities of a subsidiary in a host country as well as changes in the mandate of the subsidiary.

We analyse the trajectory of fourteen operational divisions of UK-owned firms in the Brazilian market by employing comparative case study as the research method. This method enables us to carry out a two-step data analysis. Initially, we employ the process tracing method in order to understand the evolution of each operational division in Brazil. Subsequently, we group the trajectories into four clusters on the basis of types of relationship that were activated over the trajectory of a subsidiary as well as changes of the mandates of that subsidiary. The major finding of this thesis is that the trajectory of the operational division is explained by the relationships between the focal subsidiary and headquarters, external actors and other subsidiary relationships. As these relationships are embedded in different spatial-temporal contexts, they are activated during different phases of a trajectory and often originate in different geographical contexts. As a result of these combinations of intra- and inter-organisational relationships, the operational division frequently changes the servicing mode through which it operates in the target country.

Sometimes the modal shift is not restricted to the target country. It may encompass other countries, for example when the subsidiary's mandate is extended to other geographical areas outside the host country. In this case, we say that the focal subsidiary evolves from what we have called 'locally-bound' to 'supra-local' mandates. We conclude by elaborating on how the framework developed here can be used to analyse complex trajectories of operational divisions in foreign markets as a result of the articulation of intra- and inter-organisational relationships. We contend that this framework leads to a better understanding of both incremental trajectories as well as more intricate, truncated and discontinuous trajectories.