Institutions and the location strategies of South African firms in Africa

• Author: Liezl Rees,Lyal White,Adrian Kitimbo
• Date: 01 January 2019
• Published date: 01 January 2019
• DOI: http://doi.org/10.1002/tie.21965

THE INTERNATIONALIZATION OF AFRICAN FIRMS

Institutions and the location strategies of South African firms

in Africa

Lyal White

1

| Adrian Kitimbo

2

| Liezl Rees

2

1

Johannesburg Business School (JBS),

University of Johannesburg, Johannesburg,

South Africa

2

Gordon Institute of Business Science (GIBS),

University of Pretoria, Johannesburg,

South Africa

Correspondence

Adrian Kitimbo, Research Associate, Gordon

Institute of Business Science (GIBS),

University of Pretoria, 26 Melville Road,

Johannesburg, South Africa, 2196.

Email: kitimboa@gibs.co.za

This study explores the influence of institutions on the location strategies of firms in Africa.

Specifically, the research examines the effect of governance infrastructure, a country’s overall

public institutions and policies, on the expansion strategies of three South African firms as they

entered selected African countries between 1996 and 2015. These firms include SABMiller,

MTN, and Massmart. The study makes use of structured interviews with senior directors of the

three firms, mini case studies, and the World Bank’s Worldwide Global Governance Indicators,

in an effort to understand the impact of institutions, or lack thereof, on these companies’loca-

tion choices. Results suggest that by and large, the quality of formal institutions did not have a

direct effect on the location decisions of the three firms in this study, and that these firms

found ways to mitigate the so-called institutional voids.

KEYWORDS

Africa, governance, institutions, location strategies, South African firms

1|INTRODUCTION

South African multinational enterprises (MNEs) are expanding across

Africa. These firms are among the largest investors on the continent

(Museisi, 2013). Yet despite this growth and even as the internation-

alization of South African firms has proliferated, very limited research

has been undertaken to specifically explore the expansion or location

strategies of firms venturing into Africa. These differ from firm to firm

and sector by sector, with varying degrees of success. While the

internationalization of MNEs investing in developed economies has

been researched extensively and is well documented, Museisi (2013)

notes that not enough is known about strategies employed by MNEs

expanding into emerging markets. This is particularly the case in

Africa, where a dearth of information and data has hampered

research across the continent.

With this in mind, and in an attempt to fill the existing gap in lit-

erature, this article explores the Africa internationalization strategies

of three South African MNEs from distinctive sectors. These include

SABMiller, MTN, and Massmart. These companies differ in their years

of establishment in South Africa and entry into other African markets,

and all have an extensive footprint on the continent. This makes

them useful proxies for understanding the strategies that

South African firms typically adopt as they grow and expand across

the continent.

More specifically, this study delves deeper into the traditionally

less tangible aspects or measures of economic development and com-

mercial expansion, which play a crucial role in the African context—

namely, governance infrastructure—which covers the overall “public

institutions and policies created by governments as a framework for

economic, legal, and social relations”(Globerman & Shapiro, 2003,

p. 20). It thus seeks to understand if and how host-country gover-

nance quality plays a role in determining the location choices of

South African MNEs as they expand across Africa.

This study relies on structured interviews with senior company

directors as well as secondary, authoritative sources to confirm the

empirical results of the indicators and secondary data used, and to

help understand the expansion strategies of the three firms under

study. Using qualitative mini case studies, a broad overview of the

three companies is provided. The World Bank’s Worldwide Gover-

nance Indicators are incorporated for a more rigorous understanding

of the role of formal institutional environments in the location or

entry strategies of the three firms. It is worth noting that while The

World Bank’s Worldwide Governance Indicators do provide a useful

picture of a country’s overall institutional quality, they do not

DOI: 10.1002/tie.21965

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