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Multinational corporations (MNCs) operating in countries with a poor human rights record are often the target of nongovernmental organizations (NGOs) that argue that MNCs’ decisions to stay in those countries represents support of those repressive governments. Consequently, NGOs often develop global campaigns to pressure MNCs to divest from those countries. We study how MNCs respond to these pressures through the revelatory case of the global divestment campaign against Royal Dutch/Shell during the racist apartheid regime in South Africa in the 1980s. We combine archival-based historical research and visual rhetorical analysis, and find that Royal Dutch/Shell developed a strategy consisting of creating counter-narratives at three different levels for actors within the MNC that had different interests. First, the headquarters sought to avoid setting a precedent for future boycotts; second, the peripheral subsidiaries aimed to avoid having their reputation tarnished by what was happening in South Africa; and third, the focal subsidiary was fighting for its survival. Building from this case, we inductively offer a model to analyze MNC responses to global NGO activism and discuss implications for MNCs’ political activities, their role in the defense of human rights, and strategies of corporate social responsibility.

This introductory chapter puts the volume’s contributions in dialogue with three academic fields. First, we show how the historiography of Latin American authoritarian regimes and the corporate sector benefits from debates on the role of big business in Nazi Germany. At the same time, we point out important differences to avoid inaccurate generalizations about such relationships. Second, we discuss the contributions to the dominant interpretations among scholars on Latin American history on the relationship between large corporations and authoritarian regimes, particularly focusing on the dependency and neo-institutional approaches. Lastly, we put the volume in the context of recent findings in labor studies, human rights, and Transitional Justice regarding the role played by corporations during the Cold War military dictatorships in Latin America.

The Central American authoritarian regimes have long been considered the quintessential examples of “puppets” of American interests in the region. This chapter studies the evolving relationship between dictators and foreign capital in Central America. I argue that the alliance between those regimes and foreign capital was not determined by ideological affinities but rather by foreign capital’s capability of bringing stability and personal enrichment to the rulers. Once the multinationals could no longer offer these benefits, the dictators broke the alliance and even realigned themselves with those who opposed the multinationals. The 1974 oil crisis marked the breaking point.

Scholars explaining the conditions that lead governments to expropriate local operations of foreign multinational firms largely focus on how large sunk costs decrease the multinationals’ bargaining power vis-a-vis the host government and how some political regimes (dictatorships) are more inclined to expropriate than others (democracies). Those explanations miss important considerations related to the host-country technological and political environment. In response, we develop and analyze a game theoretical model suggesting that expropriation of multinational firm operations is more likely when: (1) the host-country government capability to monitor taxation of multinational firms is lower; (2) the host-country government capability to run said operations is higher; (3) the host-country government is relatively independent from the exports of the multinational firm-led exports, and (4) political competition is highly restricted. Perhaps paradoxically, we also find that multinational firms are more likely to “self-tax” when host-country governments are too lenient. We illustrate these model-based findings with matched case studies of host-country government interactions with multinational firms in the Venezuelan and Norwegian oil industries of the 20th century.

Why did the United States subsidize American multinationals' entry into countries treated as informal colonies? We study a classic case of American imperialism, the 1903 U.S. support of Panama's secession from Colombia and subsequent U.S. payment of the 1921 reparations that opened Colombia's oil fields to Standard Oil. We test Noel Maurer's (2013) empire trap hypothesis quantitatively. Archival and econometric evidence documents Colombia's threat to Standard Oil's sunk investment, which induced the multinational to build a supermajority coalition in the U.S. Senate to back a reparations treaty. Results support the empire trap hypothesis but point out important qualifications.

In the early twentieth century, Chileans dreamed of producing and exporting oil, but the reality was that they remained dependent on imports supplied by two large multinational companies, Shell and Esso. As consumption of oil products grew, Chileans’ frustrations increased. During the Depression, a shortage of foreign exchange, continuing devaluation, price controls and lukewarm diplomatic support seriously affected the oil companies, while nationalist criticism of their duopoly intensified. With the support of the Alessandri government, a group of young engineers formed COPEC (the Compania de Petroleos de Chile) in 1934. Although the multinationals initially opposed COPEC, they proved unable to resist its entry into the market without support from their home governments; eventually the three firms signed a market-sharing agreement in 1937. The multinationals found that ultimately this benefited them by allowing them to establish closer relations with government officials and private-sector businessmen. The Chilean state thus proved able to take advantage of favourable circumstances, control the activities of the foreign companies, and provide openings for local capitalists. The cartel persisted until 1978 when the military government of General Pinochet liberalised the market. In response, Copec became a much more diversified business group with investments in a range of activities.

This chapter aims to re-examine the Chandlerian paradigm of the historical development of modern industrial enterprises in the United States by employing an analytical framework that comprehends the alternative models of corporate evolution, especially that of diversified business groups. Based on the systematic examination of the broad range of business groups that have historically developed in the United States, the chapter focuses on the two varieties of diversified business groups that historically played critical roles in that economy: those centered around overseas trading and operational firms; and those organized around banking institutions. It argues that diversified business groups played the characteristic roles of generating and reorganizing modern industrial enterprises to shape the contemporary economic landscape of oligopoly. Such roles played by the diversified business groups and their contributions to corporate and industrial development should be complemental to the Chandlerian multidivisional enterprises to configure the whole dynamics of the US economy in the long run.

Multinationals operating in site-specific industries face two types of opportunistic behavior. If they vertically integrate, host governments have incentives to change existing legislation challenging the firms' property rights. If they do not, they can be held up by business partners or lose control over the production process. These conflicting problems are reflected in the contradictory assessment made by the obsolescing bargaining power and transaction costs economics theories. Drawing on property rights theory, we introduce political integration as a strategy to address the two conflicting problems. It involves the integration of the host country's polities within the multinational's structure to avoid government opportunism, while still benefiting from the advantages of vertical integration. However, this strategy can backfire after institutional changes in the host country.

International audience; Few industries have been pressured to develop corporate social responsibility (CSR) standards and policies like oil and gas. This has translated into the creation of non-governmental organizations and branches of the oil and gas firms focused on CSR. However, given the intrinsic complex characteristics of this industry, its global reach, and the fact that its operations affect and involve a wide variety of stakeholders, CSR issues cannot be defined and implemented exclusively at the industry or firm levels, but require the participation of other actors affected directly or indirectly by oil and gas activities. In this paper we argue, first, that oil and gas CSR issues are collectively constructed through meta-organizations (organizations composed by other organizations), and, second, that the complexity and variety of CSR issues require companies to build industry-specific and non-industry-specific collective actions. Based on how oil and gas firms participate in this multi-level co-construction of CSR issues, we created a typology of meta-organizations as infra-sectoral, sectoral, cross-sectoral, and supra-sectoral meta-organizations.

This paper compares the corporate network strategies between multinational corporations of two different origins (United States and Spain), business groups, and state-owned enterprises in the public utility sector of a developing country going through economic and political transitions. The transitions we consider are from an import substitution industrialization model to an open market economy and from a democratic regime to a dictatorial one and back to democracy. We analyze the Chilean telecommunications sector between 1958 and 2005 and find that during a democratic regime all firms sought to build more networks with each other, while incentives decrease under an authoritarian regime. In the protectionist era, US investors built links with Chile’s corporate elite, while in times of an open economy, Spanish investors built these links with the government. State-owned corporations did not attempt to build links with other actors at any time, and business groups sought to build most networks among members of the group. Our findings challenge two commonly held assumptions: first, that open economies decrease incentives for domestic actors to build links with each other and, second, that close political regimes increase incentives to build networks among economic actors.

Multinational corporations in the extractive sector have historically faced challenges to their property rights, particularly in oil. International business scholars argue that firms can decrease these challenges by approaching domestic legitimating actors or seeking home government support. Through a study of the operations of Standard Oil of New Jersey in Peru and Argentina in the twentieth century, we find that these legitimating strategies can backfire due to two main elements: first, the multinational might approach actors with a different agenda from those defining, delineating, and enforcing property rights. Second, host countries can use home government support to multinationals to delegitimise foreign firms' operations.

The literature on multinational corporations argues that a foreign firm can legitimize its activities, improve its reputation in a host country, and reduce the risk of hostile actions by the host government (including expropriation) by approaching and incorporating influential members of the domestic elite in its business. By using the concept of obsolescing political legitimacy, we argue that this legitimating strategy can lead to a loss of reputation and eventual illegitimacy when the host country undergoes significant social and institutional changes. When these changes take place, the domestic society can perceive that the multinational benefited from a previous social and institutional order increasingly considered as illegitimate. Under these circumstances, the new order will question the legitimacy of the multinational's operations, increasing the risk of expropriation. We illustrate our hypothesis with the case of the political strategies of the International Telephone and Telegraph Company (ITT) in Chile in the twentieth century.

This paper studies the practice of integration of influential host country actors to a multinational corporation as a strategy to decrease problems of legitimacy to the foreign firm before the host country’s society. By developing the concept of obsolescing legitimacy, we argue that this strategy provides legitimacy to the foreign firm only in the absence of institutional changes at the macro-political level in the host country. Once these changes take place, an alliance by the multinational to an elite or a political system no longer ruling the host country will become a liability and will generate problems of legitimacy for the multinational. We illustrate our argument with the case of the US multinational United Fruit Company in Central America.