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"Institutional Change, Obsolescing Legitimacy, and Multinational Corporations: The Case of the Central American Banana Industry"

Marcelo Bucheli and Min-Young Kim

 

First Author :

Marcelo Bucheli
Business Administration
University of Illinois at Urbana-Champaign, College of Business
1206 S. Sixth Strett
198 Wohlers Hall, MC 706
Champaign, IL 61820
USA

217-244-0208

mbucheli@illinois.edu

http://www.business.uiuc.edu/facultyprofile/faculty_profile.aspx?ID=10771


Second Author :

Min-Young Kim
Business Administration
University of Illinois at Urbana-Champaign, College of Business
1206 S. Sixth Street
350 Wohlers Hall, MC 706
Champaign, IL 61820
USA

mkim229@illinois.edu

 
 
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 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 :
 
Central America, foreign direct investment, institutional change, Obsolescing legitimacy, political integration, political risk, vertical integration
 
 
Manuscript Received : 2010
Manuscript Published : 2010
 
 
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