Multinational corporations' investment in the oil and gas sectors of Azerbaijan and Kazakhstan: Divergent corporate behavior in the age of globalization

Why is there a variance in the size of investment by American multinational corporations (MNCs) in the oil and gas sectors of Azerbaijan and Kazakhstan? All ten of the leading oil MNCs in the world petroleum industry have invested in the region. However, the size of investment by the firms varies in both countries, creating a divergent investment pattern. The argument in this study is that host government policies regarding firm characteristics and firms' responses to the opportunities and risks which were shaped through a strategic interaction process explain the divergent behavior of MNCs.; The general explanations about the leading role of MNCs and their convergent behavior in the globalization process are problematic. Rather than relying on these, three models are considered to explain the observed divergent behavior of MNCs. The “follow the leader” model and the competitive advantages model are drawn from the literature, while an alternative explanation is developed to explain how the strategic interaction between the host country and the firms influenced the observed divergent investment pattern of the MNCs.; The predictions of the three models are applied systematically to four different cases to explain the divergent behavior of firms. The analysis of cases demonstrates that the host government policies of Azerbaijan and Kazakhstan regarding firm characteristics and the responses of firms to opportunities and risks embedded in the oil and gas sectors of Azerbaijan and Kazakhstan influenced the size of investment by American firms.; The findings are striking in their support of the argument for convergence in the behavior of firms, because one would expect convergent behavior more likely in the oil industry than in manufacturing and high-technology industries. Oil is a standard product in contrast to the heterogeneity of products in the manufacturing industry. In this context, the divergent corporate behavior is re-interpreted by explaining theoretically the firms' core structures and important strategies which reflect the different domestic institutions and ideologies within which firms are embedded.