Multinational Enterprise Entry Modes in Sub-Saharan Africa: An Eclectic Paradigm Perspective (original) (raw)
Related papers
Determinants of Entry Mode Choice of MNCs In Emerging Markets: Evidence From South Africa and Egypt
Emerging Markets Finance and Trade, 2005
The literature on the choice of entry mode of multinational corporations (MNCs) at the time of their entry into new host countries has almost entirely focussed on the choice of MNCs entering other developed economies. Our paper addresses this lacuna in the literature using unique firm-level data collected from MNC affiliates operating in two major emerging markets, namely, South Africa and Egypt. Our results indicate that two key determinants of the choice of entry mode are the resource needs of the MNC and the business/institutional environment in the host country. They also indicate that priors about the choice of entry mode that are based on developed country experience are not necessarily relevant in the emerging market context. JEL Classifications: D21, D23, F23, L14, L21
Several internationalization theories have been developed over the past few decades that have made great contributions in explaining enterprise internationalization and their mode of entry strategy. It has been suggested that the determinants of entry mode choice of enterprises from emerging and frontier markets differ from those of comparable enterprises from advanced economies. Literature review appears to indicate that there is a need to expand the framework for entry mode strategies to accommodate the expansion issues enterprises from emerging and frontier countries face in the global marketplace. Nevertheless, not much information and an acceptable conclusion have been made on how MNEs from frontier markets internationalize and what factors influence their choice of entry into those markets. This study investigated the internationalization strategies of Lusophone Africa MNEs from Angola and Mozambique, more specifically their entry mode. Information was gathered through a survey of 29 MNE’s upper management respondents and subsequent face-to-face semi-structured interviews with 24 of them in their countries. The results of this study suggest that most MNEs opted for equity-based investment strategies, mainly joint venture and M&E as their preferred mode of entry when internationalizing. A significant group of them opted for e-commerce/e-business strategies, and direct and indirect exports. A smaller portion of the interviewees chose Greenfield investment as a mode of entry. Many of these MNEs could be classified as born global/INV. Finally, this study presents a conceptual framework for use in studying the entry mode choice of enterprises from Lusophone Africa frontier markets and presents research propositions for better understanding the determinants of entry mode strategies of enterprise from Angola and Mozambique. Keywords: Internationalization, Entry Mode, Emerging Markets, Frontier Markets, Lusophone African MNEs, Angola, Mozambique
2016
Acquisition-When a multinational enterprise (MNE) purchases a shareholding in an existing company with an established business situated in a foreign country. Control-The ability to determine the strategy, operations and policies and procedures of a company, as well as appoint management. This ability is usually linked to the ownership of a majority shareholding. Distance-Differences in culture, values, institutions and regulations between the home and host country which add to the unfamiliarity and complexity of doing business in a host country by an MNE. Economic interest-The proportionate interest held by an investor in the net assets of a company and the percentage share of the profits of a company to which they are entitled. Entry mode-The manner of an MNE entering a new foreign market or substantially increasing the scale of operations in a foreign country, particularly the choice between establishing greenfields or making an acquisition, and the choice between having wholly owned subsidiaries, majority shareholding, minority shareholding, or joint ventures. Greenfield-When a multinational company establishes and assumes a shareholding in a completely new company situated in a foreign country. Home country-The country from which the MNE originates or where it has its headquarters, and from where it is effectively managed. Host country-The foreign country in which the MNE is invested. Inorganic growth-When an MNE's growth outside its home country is driven by the acquisition of established companies. Joint venture-A jointly controlled company in which partners share control; with neither party able to determine strategy, operations, policies and procedures, or appoint management without the agreement of the other. Liability of Foreignness-The competitive disadvantages potentially experienced by an MNE in a foreign market by virtue of lacking knowledge about the local market and the iv preferences of its customers, being unfamiliar with local regulations and culture, as well as the absence of strong relationships with key stakeholders in that market. Majority and minority shareholding-Shareholding above or below 50% respectively. Organic growth-When an MNE's growth outside its home country is driven by the establishment of greenfield operations, followed by gradual increases in revenue and market share from the greenfield. Risk-Risk in this context is defined as any factor contributing to perceptions of host market uncertainty, unfamiliarity, volatility and unpredictability on the part of the South African MNE.
Internationalization theories suggest that enterprises from emerging and frontier markets will adopt different entry modes than those in advanced economies. Very few studies to date, however, examine the process of how multinational enterprises (MNEs) from frontier markets internationalize or evaluate which factors influence their mode of entry into global markets. This research investigates the internationalization strategies of Lusophone Africa MNEs from Angola and Mozambique, more specifically their entry mode, to expand the framework for entry mode strategies to include the motivations and issues of MNEs from emerging and frontier economies. Surveys, as well as in-depth, in-country, qualitative interviews reveal that these frontier and emerging market MNEs opted for equity-based investment strategies as their preferred mode of entry. A significant second group opted for e-commerce/e-business strategies, and direct and indirect exports. Finally, a smaller portion of the interviewees chose Greenfield investment as a mode of entry. Many of these MNEs could be classified as born global/INV.
Understanding establishment mode choice of foreign manufacturing firms in Ghana
International Journal of Emerging Markets , 2015
Purpose – The purpose of this paper is to analyse the foreign direct investment (FDI) strategies of manufacturing firms in Ghana using the eclectic model in order to understand how ownership, location and internalization factors impact FDI to developing countries like Ghana. Design/methodology/approach – The authors use a quantitative methodology in order to statistically explore the relationships between dependent and independent variables. The data comes from a sample of 75 multinational enterprises that invested in the manufacturing sector between 1994 and 2008. Findings – The results reveal that large firm size, extensive international experience and large market size lead to the choice of acquisition mode of entry, while high cultural distance, high country risk, high proprietary assets and incentives lead to the choice of greenfield mode in the context of Ghana. Research limitations/implications – The results imply that the different economic, business and legal (locational) conditions of developing countries create different FDI strategies and paths of companies compared to developed markets. Practical implications – Policy makers in developing countries should make efforts to improve market size, the institutional and regulatory environment, as well as the availability of human capital in order to attract FDI. Originality/value – FDI studies have mainly analysed establishment mode strategies of firms in advanced markets. There is an increasing amount of research on FDI in emerging markets but very little on developing countries and African markets. Therefore, this study enables the authors to develop implications for existing theory and generate practical implications for firms and policy makers related to African and developing country markets. Keywords Africa, Developing countries, Ghana, Eclectic paradigm, Establishment mode, Foreign direct investment
Journal of Transnational Management, 2017
Internationalization theories suggest that enterprises from emerging and frontier markets will adopt different entry modes than those in advanced economies. Very few studies to date, however, examine the process of how multinational enterprises (MNEs) from frontier markets internationalize or evaluate which factors influence their mode of entry into global markets. This research investigates the internationalization strategies of Lusophone Africa MNEs from Angola and Mozambique, more specifically their entry mode, to expand the framework for entry mode strategies to include the motivations and issues of MNEs from emerging and frontier economies. Surveys, as well as in-depth, in-country, qualitative interviews reveal that these frontier and emerging market MNEs opted for equity-based investment strategies as their preferred mode of entry. A significant second group opted for e-commerce/e-business strategies, and direct and indirect exports. Finally, a smaller portion of the interviewees chose Greenfield investment as a mode of entry. Many of these MNEs could be classified as born global/INV.
Lusophone-African SME internationalization: A case for born global and international joint ventures
Journal of Transnational Management, 2019
This study investigates the internationalization strategies of Lusophone Africa multinational enterprises (MNEs) from Angola and Mozambique, more specifically their entry mode. Information was gathered through a survey of 29 MNEs upper management respondents and subsequent face-to-face semi structured interviews with 24 of them in their countries. The results suggest that most MNEs opted for equity-based investment strategies, mainly joint venture and mergers and acquisitions (M&A) as their preferred mode of entry when internationalizing. A significant group of them opted for e-commerce/ e-business strategies and direct and indirect exports. A smaller portion of the interviewees chose Greenfield investment as a mode of entry. Many of these MNEs could be classified as born global/international new venture (INV). Finally, this study presents a conceptual framework for use in studying the entry mode choice of enterprises from Lusophone Africa frontier markets and presents research propositions for better understanding the determinants of entry mode strategies of enterprise from Angola and Mozambique.
2015
This study examined the influence of international market entry strategies on the financial performance of manufacturing multinationals in Kenya. 108 manufacturing firms which are located in Nairobi formed the population of the study. Questionnaire was used as the preferred data collection tool. Both descriptive and inferential statistics were utilized to facilitate data analysis. Results indicated that manufacturing multinationals used various international market strategies to venture into business. These strategies include licensing, whole owned subsidiaries, joint venture, exporting, direct investment and strategic alliances. Study findings also indicated that firms intending to go international do consider various factors when making a choice of a market entry strategy. These considerations include resources available, company competence, competition in the market, size of the host country, availability of possible partnering firms within host country, host country requirements...
It is now stylized that the importance of foreign direct investment for developing countries and emerging markets arises from the impact of the presence of multinational corporations (MNCs) in the host country on the productivity of local firms, by way of technology diffusion and competition. There is also general agreement that the extent of technology transfer by an MNC to a developing country affiliate depends on the extent of its control on the local affiliate and that, in turn, the extent of this control depends on the mode of entry of the MNC into the host country. However, the existing literature is based on the experience of developed countries and as such does not contribute to the literature on development economics. This article addresses this lacuna using unique firm-level data from South Africa and Egypt. Our results indicate that the determinants of entry mode choice not only differ between developed and developing countries, but also among developing countries. They also bring into question the role of MNCs in fostering productivity growth in developing countries.
2014
Over the last two decades, developing countries have experienced a high volume of foreign direct investment (FDI). It is commonly accepted that many multinational enterprises (MNEs) are entering into multiple markets, in order to increase their profitability and to reduce the risk of relying upon one market. This study aims to provide insight into the internationalisation of MNEs from both developed and developing countries into developing markets. It seeks to test what, if anything, MNEs from developing countries do more effectively than MNEs from developed countries within these emerging markets. The central thesis of the study is that MNEs from developing countries will have certain advantages over MNEs from developed countries, and will therefore be more prevalent amongst the largest foreign firms within emerging markets. This thesis is based on the assumption that MNEs from developing countries have prior experience of operating within similar emerging markets, and so are bette...