Organizational Responses to Regional Integration Among MNEs in Latin America

Contingency theory predicts that companies facing increasing market integration within a region need to develop more centralized strategies that require greater harmonization of business structures, closer inter-subsidiary coordination and the adoption of managerial policies that support such an organization.The political and economic reforms that took place in Latin America in the 1990s and led to greater market integration offer a natural experiment in which to study the response of multinational companies to changes in their competitive environment.A survey of MNEs reveals that they undertook greater coordination of regional operations during the decade, as expected, but not along all dimensions and not always proportionally to the changes perceived by their managers. The linkages between different dimensions of perceived market integration and organizational responses are largely significant and in the predicted sense.