Through the implementation of the decree “Heroes del Chaco” by Evo Morales (2006), Petrobras was basically forced to enter a Joint Venture with the Bolivian state-owned gas company YPFB, disadvantaging the Brazilian firm.
As identified by Simon (1976), rationality is bounded and omniscient decision-making is impossible. Companies therefore need to rely on the incomplete and limited information available. When entering the Bolivian market in the 1990s, there had been no signs pointing towards the drastic environmental changes concerning the transaction that would have such a decisive and costly impact on Petrobras’ local activities. Since there are no completely rational choices and future occasions can never be predicted, it is not justifiable …show more content…
When changes occur, the affected individuals experience a “gap” between familiarity and the unknown (Louis 1980; Louis & Sutton 1991; Balogun & Johnson 2004). Due to the lack of acquaintance and comprehension regarding a certain situation, predictions concerning the future are vague. Consequently, individuals start to act in a more cautious way and make decisions “less automatically” (Fiske & Taylor 1991; Balogun & Johnson 2004). This type of behavior can be easily transferred to the case of Petrobras. Even though after almost 10 years of activities in Bolivia, the company had developed experiential- and market-specific knowledge and became sensitive towards exploitation opportunities (Johanson & Vahlne 1977), such as the beneficial price and soil conditions, the new governmental regulations were implemented unexpectedly. How would the market develop within the future? Would other regulations follow? Would the competition deriving from the governmental support regarding domestic firms increase? Dependent on these factors, modifications concerning quantity, quality, dates, budget (Picot, Dietl, Franck, Fiedler, Royer 2012: 73) or commitment concerning the transaction consisting in gas gathering and export can be necessary, leading to rising costs. Bearing in mind that transaction costs are not essentially monetary, expenditures of time deviating from the long-lasting renegotiations with YPFB need to be considered. Therefore, John and Heide (1990) explain the necessity of closeness in interfirm relationships, especially if they are expected to be long-term. Nevertheless, considering how negatively connoted the connection between both sides had become, the predisposition for a harmonious cooperation
As identified by Simon (1976), rationality is bounded and omniscient decision-making is impossible. Companies therefore need to rely on the incomplete and limited information available. When entering the Bolivian market in the 1990s, there had been no signs pointing towards the drastic environmental changes concerning the transaction that would have such a decisive and costly impact on Petrobras’ local activities. Since there are no completely rational choices and future occasions can never be predicted, it is not justifiable …show more content…
When changes occur, the affected individuals experience a “gap” between familiarity and the unknown (Louis 1980; Louis & Sutton 1991; Balogun & Johnson 2004). Due to the lack of acquaintance and comprehension regarding a certain situation, predictions concerning the future are vague. Consequently, individuals start to act in a more cautious way and make decisions “less automatically” (Fiske & Taylor 1991; Balogun & Johnson 2004). This type of behavior can be easily transferred to the case of Petrobras. Even though after almost 10 years of activities in Bolivia, the company had developed experiential- and market-specific knowledge and became sensitive towards exploitation opportunities (Johanson & Vahlne 1977), such as the beneficial price and soil conditions, the new governmental regulations were implemented unexpectedly. How would the market develop within the future? Would other regulations follow? Would the competition deriving from the governmental support regarding domestic firms increase? Dependent on these factors, modifications concerning quantity, quality, dates, budget (Picot, Dietl, Franck, Fiedler, Royer 2012: 73) or commitment concerning the transaction consisting in gas gathering and export can be necessary, leading to rising costs. Bearing in mind that transaction costs are not essentially monetary, expenditures of time deviating from the long-lasting renegotiations with YPFB need to be considered. Therefore, John and Heide (1990) explain the necessity of closeness in interfirm relationships, especially if they are expected to be long-term. Nevertheless, considering how negatively connoted the connection between both sides had become, the predisposition for a harmonious cooperation