Country of Origin Effects and their impact on multinationals from emerging markets.

downloadAn important question arises from the study of international companies: How does the so-called “country of origin effects” impact emerging market multinationals? This debate is particularly relevant at the current stage of globalization due to the many existing theories of international business. In this particular article I will focus on country of origin effects in Brazilian multinationals .

According to Fleury and Fleury (2014), the first outcomes from the studies of internationalization of multinational from Brazil  suggest three main characteristics of these companies: a) they develop distinct Firm Specific Advantages (FSAs, link here) when compared to both developed country multinationals and multinationals from other emerging countries; b) they adopt particular internationalization strategies in what concerns country choice, entry mode and commitment; c) they seem to be in the process of developing innovative ways of configuring their international value chains and managing foreign subsidiaries.


An additional trait distinctive of Brazilian multinationals is their tendency to operate mainly in low-tech sectors, where brand and product innovation are not so relevant, as other types of innovation are. Studies on Brazilian firms identified two types of innovation found in  successful Brazilian companies: excellence in manufacturing (or process engineering) and agile business models.

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In general, internationalization strategies involve two types of decisions: ownership mode (whether a company pursue joint-ventures or set-up wholly-owned subsidiaries) and establishment mode (an acquisition or a greenfield project). The modes of Brazilian firms are explained bellow.

Entry mode/ownership mode: Brazilian Multinationals usually demand full control as the preferential entry mode, instead of collaborative arrangements and networking practices. Historically, Brazilian firms have shown difficulties in engaging into collaborative arrangements due to the strong obsession of control many family-owned firms present.

Entry mode/establishment mode: Brazilian global companies are eager for acquisitions especially when opportunities arise: there are several cases of Brazilian firms acquiring developed countries companies facing financial problems. The propensity to embark in acquisitions is justified by two factors: risk-aversion and preference to rely on their own funding which, evidently, reduces the range of potential acquisitions and privileges cheap deals. The second factor reinforces the first: Brazilian firms display distinctive competences in manufacturing and finance which are the key factors to make the turnaround of firms in the brink of failure due to production inefficiency and dire finances.

Additionally, multinationals from Brazil tend to show a relative commitment in internationalization. One of the possible reason is the fact that Brazilian firms internationalized autonomously, e.g. in accordance to their own drivers and decisions, without any cooperative arrangement or governmental support. Therefore, they internationalize on their own and stop the process based on their self-interest.

Finally, there is the discussion of the entry location for internationalization. Latin America is the preferred choice for the great majority of Brazilian multinationals, a fact easily explained by the Uppsala model (link here), mostly because Brazilian organizations are more confident in applying the experience they amass from operating a country where institutional turbulence is high in countries with similar characteristics. Summarizing, Latin America is the preferred location for the entry strategies not only for the arguments disclosed by the Nordic School but also due to the capacity of Brazilian multinationals to deal with turbulent institutional environments. Table 1 consolidates the issues presented in this short article.

Environmental factor Macro Level Micro Level
Industrialization policies Inward looking Little importance to external markets; development of firm-specific advantages
Macroeconomic policies Short-term perspective Innovative business models
National culture Conservatism and risk-aversion Resistance to alliances
Abundance of Natural resources Focus on commodity and/or mature industries Handicap for the development of technology intense industry; comparative advantages in commodities and basic input markets


Fleury, A. e Fleury, M.T. (2014). “Country-of-origin effects on internationalization: insights from Brazil”. In Alvaro Cuervo-Cazurra e Ravi Ramamurti (eds.): Understanding emerging market multinationals. Cambridge, UK: Cambridge University Press

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