Management International Review

, Volume 52, Issue 6, pp 847–877

Political Institutional Change, Obsolescing Legitimacy, and Multinational Corporations

The Case of the Central American Banana Industry
Research Article

DOI: 10.1007/s11575-012-0141-4

Cite this article as:
Bucheli, M. & Kim, MY. Manag Int Rev (2012) 52: 847. doi:10.1007/s11575-012-0141-4

Abstract

  • 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.

Keywords

Obsolescing legitimacyPolitical integrationInstitutional changeVertical integrationPolitical riskForeign direct investmentCentral America

Copyright information

© Gabler Verlag 2012

Authors and Affiliations

  1. 1.Department of Business Administration, College of BusinessUniversity of Illinois at Urbana-ChampaignChampaignUSA
  2. 2.School of BusinessUniversity of KansasLawrenceUSA