Internationalization dilemma for Brazilian firms: China vs. the Greater Mercosur region

Abstract

Purpose – The purpose of this paper is to explore, using the conceptual frameworks of psychic distance and resource-based view, how Brazilian firms resolve strategic dilemma. Brazilian firms face a strategic dilemma about whether to diversify and exploit the rapidly growing markets of China or to protect and expand the established markets of the Greater Mercosur region. The strategic responses of Brazilian business to business firms are examined within the context of internationalization decisions. Design/methodology/approach – The paper takes a qualitative approach to study the decisions taken by Brazilian firms to deal with the strategic dilemma arising from competitive developments in domestic and regional markets. Findings – Findings support four hypotheses based on the psychic distance and resource-based view frameworks. However, the fifth hypothesis that trust would be an impediment for establishing business in China for Brazilian firms was not supported. Trust did not appear as a concern for Brazilian businesses. Practical implications – Two practical implications can be drawn from the findings. First, Brazilian firms have to consider whether they have made themselves vulnerable to attacks from Chinese firms in the Greater Mercosur region by not aggressively entering the Chinese markets. Second, they also have to understand whether their lack of strong presence in the Chinese markets has resulted not only in lost opportunities but also in making it difficult for them to enter the market later. Originality/value – The paper takes a multi-theoretical approach to provide insights into the international business expansion decisions of firms in a major economy in the Greater Mercosur region. It contributes to the growing literature on firms in emerging economies. By adopting a qualitative approach to study the research questions, the paper provides insights into the behaviors of firms confronting strategic tradeoffs.