MNCs Strategic Response to Sub Regional Institutions: Evidence from the Mexican Aerospace Industry

In this paper, we aim to understand how the subsidiaries of multinational corporations (MNCs) engage in the process of institutional building at sub-regional level. It is often argued that MNC have a competitive advantage over small and medium enterprises (SMEs) in this process. MNCs’ unique social positions as well as their exposure to ambiguous field conditions strengthen their ability to undertake strategic responses thereby resulting in a particular institutional advantage (Regner and Edman, 2014:279). Their capacity to span multiple contexts and national boundaries provides MNC subunits with a set of resources and capabilities that increase their capacity to “play with institutions”. Domestic firms do not have the same resources and are less likely to strategize or use institutions to pursue their own interests. While domestic firms are more likely to adapt and conform to institutional pressures, MNCs can develop a wider range of responses that can deviate from and even challenge prevailing institutions (Cantwell et al, 2010).

The paper examines how actors engage in the process of institutional building in the aerospace industry in Mexico. Over the last decade, Mexico has increased its role in the global aerospace industry. FDI has increased significantly, namely from 250 million US $ in 2004 to 1.1 billion in 2014, while employment has surged from 13,000 in 2004 to 45,000 in 2014. The industry is concentrated in five regions and our focus is on Querétaro which is known for having the most dynamic cluster in the country. In 2015, we conducted interviews (n=30) with government officials, innovation and training center representatives, trade union officials and managers of MNCs in this fast growing industry.

Drawing on this material, the paper seeks to understand from ‘below’, the process of institutional building in the aerospace in Querétaro. We highlight the strategic responses of MNCs and their role in the process of institutional building. We also identify the institutional blockages that seem to lock actors into the Mexican form of economic strategy which tends to rest on low wages and flexible workplaces as a basis of international comparative advantage.