Industrial policy refraction: how corporate strategy shapes development outcomes in Brazil

Abstract

This dissertation is motivated by a desire to understand why multinational firms respond to industrial policies in different ways, and how their responses shape development outcomes. From 18th­century United States to modern-­day Brazil, governments have relied on tariff and non-­tariff barriers to induce industrial development within their countries' borders. For states seeking to catch up, the acquisition and assimilation of frontier technology has always been paramount (Abramovitz, 1986). Multinational firms based in industrialized countries have long been seen as sources of technology (Evans, 1979). Despite their importance in the process of economic development, they are often underspecified in the literature. Scholars of various disciplinary persuasions have examined industrial policy's antecedents (Dobbin, 1994; Breznitz, 2007) as well as its design principles (Rodrik, 2004; Sabel, 2009), but few have examined its object: the firm. My aim in this study is to explore how corporate strategy moderates the relationship between an industrial policy's aims and its outcomes. I examine two multinational information and communication technology (ICT) firms, explaining why they have responded to the Brazilian Informatics Law in different ways, and why these differences matter. On the basis of interviews, extended periods of observation and secondary materials, I develop a multilevel comparative case study that focuses on these firms and their Brazilian subsidiaries, as well as on their local research and development (R&amp;D) partners and the teams of engineers that comprise them. I introduce the inductively derived concept of industrial policy refraction, proposing that foreign firms respond to host countries' industrial policies in ways that are consonant with their corporate strategies; that centralized firms are less likely to comply with a host government's demands than are decentralized firms. Refraction is not categorical, but a matter of degree. My findings are brought to bear on three traditionally disparate bodies of research âindustrial policy, corporate strategy and institutional theory â extending each and also bringing them into fruitful communion with one another.</p