ABSTRACT
This chapter uses the Montreal Local-Global model of local-global interaction as an analytical template with which to understand two acquisitions in the Brazilian electricity industry. It compares the strategic approaches taken in two different acquisitions. The first is the acquisition of a Brazilian electricity distribution and supply company by a Portuguese multinational corporation (MNC), the second a similar acquisition by a French MNC. At first glance, the two acquiring MNCs adopted similar strategic approaches in positioning their new Brazilian subsidiary in the local environment, but achieved different results. This ten-year longitudinal comparative study integrates findings of systematic research on MNCs’ strategy in the Brazilian electricity sector. It illustrates the uneasy interaction between a developing country’s traditional logic and MNCs’ economic logic, and highlights key lessons about the determinants of success when dealing with such an acquisition. This chapter is grounded in the Molz-Raţiu (forthcoming) model of local global interaction. The model is grounded in institutional theory and argues that there are different dominant logics. Most of the Organisation for Economic Cooperation and Development (OECD) countries have a dominant logic built around neoclassical economic rationality, while developing and emerging country firms have a dominant logic based on local traditions. These two different logics are apparent in the interaction between multinational corporations from the OECD countries and local actors in emerging and developing countries. The OECD economic logic is built around concepts of efficiency and effectiveness in generating surplus, while the traditional logic of the emerging and developing countries is built around anthropological conceptualizations of traditional culture. In emerging and developing countries’ traditional logic, greater emphasis is placed on community-based values and property rights to organize and sustain human relationships. Decisions are often slow and based on respect for traditional criteria. Local social networks are built around clans and community. This is in contrast with the economic logic of the developed OECD countries, which is built around the supremacy of the market for achieving economic objectives. Property rights are defined in relation to a market logic and organized to generate economic surplus within a clear, formal and stable institutional structure. Decision criteria are based on economic cost-benefit analysis, results and
performance. The global OECD economic logic does not refer to specific national or local roots, and social networks are global, concerned with achieving economic objectives. This chapter applies the Molz-Raţiu model in comparing two acquisitions of Brazilian electricity utilities. The first acquisition was made by a French multinational corporation and the second was made by a Portuguese multinational corporation. Thus, both MNCs are from OECD countries. Using the Molz-Raţiu model, this chapter explores the concept of dominant economic logic and local traditional logic in the interaction involved in these two MNC acquisitions of Brazilian electricity utilities. First, we intend to present an overview of Brazilian society’s culture and values, then one of the Brazilian electricity industry. In subsequent sections we examine the multinational companies and their acquisition strategies in Brazil. Finally, we discuss the positioning strategies of the newly acquired companies in the Brazilian market, before offering a few conclusions.
