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Keywords:

  • multinational corporations and market integration;
  • Latin America;
  • organizational structure and performance;
  • subsidiary networks;
  • HQ-subsidiary roles and relationships

Abstract

We propose that to be successful under major environmental changes, an organizational response must fit the new environmental contingencies. We employ the political and economic reforms in Latin America during the 1990s as a natural experiment in which to examine these phenomena. Increased market integration should lead firms to establish closer managerial coordination among subsidiaries to an extent proportional to the strength of external changes. Firms that retain under- or overstructured organizations will underperform those whose response is fitting to environmental changes particular to their industry. Moreover, firms that exhibit an appropriate regional response are likely to have organizational capabilities transferable to a global level. Data obtained through a survey of MNEs operating in Latin America by 2000 and from Compustat support the theory proposed.