Last modified: 2019-08-02
Abstract
This study examines the internationalization of African new ventures. In particular, integrating insights from agency theory and institutional theory, it examines how the knowledge, resources, and influence of firms’ owners shape their willingness and ability to internationalize and, also, how the informal and formal institutions in the firms’ home countries shape the influence of these owners. Supporting our theory, the results suggest that both state ownership and foreign ownership increase African new ventures’ internationalization. Importantly, however, the fractionalization of informal institutions (i.e., variation in ethnicities, languages, and religions) weakens the effect of foreign ownership on internationalization, and the development of formal institutions (i.e., reliable and effective governments) weakens the effect of state ownership on internationalization. We discuss the implications of the study for agency theory, for institutional theory, and for understanding and promoting African new ventures’ internationalization.
References
Aharonovitz, GD, Nyaga, EK. 2010. Values, cultural practices, and economic performance: theory and some evidence from Kenya. World Development 38(8): 1156–1167.
Alesina, A, Spolaore, E. 2003. The Size of Nations. MIT Press: Cambridge, MA.
Alesina, A, Devleeschauwer, A, Easterly, W, Kurlat, S, Wacziarg, R. 2003. Fractionalization. Journal of Economic Growth 8(2): 155–194.
Assenova, VA, Sorenson, O. 2017. Legitimacy and the benefits of firm formalization. Organization Science 28(5): 804–818.
Bao, SR, Lewellyn, KB. 2017. Ownership structure and earnings management in emerging economy: an institutionalized agency perspective. International Business Review 26(5): 828–838.
Bartlett, CA, Ghoshal, S. 2000. Going global: lesson from late movers. Harvard Business Review 78(2): 132–142.
Bettinazzi, EL, Zollo, M. 2017. Stakeholder orientation and acquisition performance. Strategic Management Journal 38(12): 2465–2485.
Birhanu, AG, Gambardella, A, Valentini, G. 2016. Bribery and investment: firm‐level evidence from Africa and Latin America. Strategic Management Journal 37(9): 1865–1877.
Birol, F. 2017. Key world energy statistics 2017. International Energy Agency. https://www.iea.org/publications/freepublications/publication/KeyWorld2017.pdf [7 May 2019].
Boyd, BK, Solarino, AM. 2016. Ownership of corporations: a review, synthesis, and research agenda. Journal of Management 42(5): 1282–1314.
Certo, ST, Busenbark, JR, Woo, H, Semadeni, M. 2016. Sample selection bias and Heckman models in strategic management research. Strategic Management Journal 37(13): 2639–2657.
Chipman, HA, George, EI, McCulloch, RE. 2010. BART: Bayesian additive regression trees. Annals of Applied Statistics 4(1): 266–298.
Cuervo-Cazurra, A, Inkpen, A, Musacchio, A, Ramaswamy, K. 2014. Governments as owners: state-owned multinational companies. Journal of International Business Studies 45(8): 919–942.
Cui, L, Jiang, FM. 2012. State ownership effect on firms' FDI ownership decisions under institutional pressure: a study of Chinese outward-investing firms. Journal of International Business Studies 43(3): 264–284.
Daily, CM, Dalton, DR, Cannella, AA. 2003. Corporate governance: decades of dialogue and data. Academy of Management Review 28(3): 371–382.
Dalton, DR, Hitt, MA, Certo, ST, Dalton, CM. 2008. The fundamental agency problem and its mitigation: independence, equity, and the market for corporate control. Academy of Management Annals 1(1): 1–64.
Devarakonda, SV, Reuer, JJ. 2018. Knowledge sharing and safeguarding in R&D collaborations: the role of steering committees in biotechnology alliances. Strategic Management Journal 39(7): 1912–1934.
Douma, S, George, R, Kabir, R. 2006. Foreign and domestic ownership, business groups, and firm performance: evidence from a large emerging market. Strategic Management Journal 27(7): 637–657.
Dow, D, Cuypers, IR, Ertug, G. 2016. The effects of within-country linguistic and religious diversity on foreign acquisitions. Journal of International Business Studies 47(3): 319–346.
Ellis, KM, Lamont, BT, Holmes, RM, Ro, S, Faifman, L, DeGuetto, K, Parola H. 2018. Institutional determinants of ownership positions of foreign acquirers in Africa. Global Strategy Journal 8(2): 242–274
Filatotchev, I, Stephan, J, Jindra, B. 2008. Ownership structure, strategy controls and export intensity of foreign-invested firms in transition economies. Journal of International Business Studies 39(7): 1133–1148.
George, G, Corbishley, C, Khayesi, JN, Haas, MR, Tihanyi, L. 2016. Bringing Africa in: promising directions for management research. Academy of Management Journal 59(2): 377–393.
Giuliani, E, Santangelo, GD, Wettstein, F. 2016. Human rights and international business research: a call for studying emerging market multinationals. Management and Organization Review 12(3): 631–637.
Greve, HR, Yue, LQ. 2017. Hereafter: how crises shape communities through learning and institutional legacies. Organization Science 28(6): 1098–1114.
Hearn, B. 2015. Institutional influences on board composition of international joint venture firms listing on emerging stock exchanges: evidence from Africa. Journal of World Business 50(1): 205–219.
Hernandez, E, Guillén, MF. 2018. What’s theoretically novel about emerging-market multinationals? Journal of International Business Studies 49(1): 24–33.
Hirano, K, Imbens, GW, Ridder, G. 2003. Efficient estimation of average treatment effects using the estimated propensity score. Econometrica 71(4): 1161–1189.
Hitt, MA, Tihanyi, L, Miller, T, Connelly, B. 2006. International diversification: antecedents, outcomes, and moderators. Journal of Management 32(6): 831–867.
Ho, DE, Imai, K, King, G, Stuart, EA. 2007. Matching as nonparametric preprocessing for reducing model dependence in parametric causal inference. Political Analysis, 15(3): 199–236.
Ho, JLY, Wu, A, Xu, SX. 2011. Corporate governance and returns on information technology investment: evidence from an emerging market. Strategic Management Journal 32(6): 595–623.
Hoetker, G. 2007. The use of logit and probit models in strategic management research: critical issues. Strategic Management Journal 28(4): 331–343.
Holmes, RM, Miller, T, Hitt, MA, Salmador, MP. 2013. The interrelationships among informal institutions, formal institutions, and inward foreign direct investment. Journal of Management 39(2): 531–566.
Holmes, RM, Hoskisson, RE, Kim, H, Wan, WP, Holcomb, TR. 2018. International strategy and business groups: a review and future research agenda. Journal of World Business 53(2): 134–150.
Holmes, RM, Zahra, SA, Hoskisson, RE, DeGhetto, K., Sutton, T. 2016. Two-way streets: the role of institutions and technology policy in firms’ corporate entrepreneurship and political strategies. Academy of Management Perspectives 30(3): 247–272.
Hoskisson, RE, Johnson, RA, Moesel, DD. 1994. Corporate divestiture intensity in restructuring firms: effects of governance, strategy, and performance. Academy of Management Journal 37(5): 1207–1251.
Imai, K, Ratkovic, M. 2014. Covariate balancing propensity score. Journal of the Royal Statistical Society: Series B (Statistical Methodology) 76(1), 243–263.
Inoue, CFKV, Lazzarini, SG, Musacchio, A. 2013. Leviathan as a minority shareholder: firm-level implications of state equity purchases. Academy of Management Journal 56(6): 1775–1801.
Iriyama, A, Kishore, R, Talukdar, D. 2016. Playing dirty or building capability? Corruption and HR training as competitive actions to threats from informal and foreign firm rivals. Strategic Management Journal 37(10): 2152–2173.
Khan, S, Tamer, E. 2010. Irregular identification, support conditions, and inverse weight estimation. Econometrica 78(6): 2021–2042.
Kiss, AN, Danis, WM, Cavusgil, ST. 2012. International entrepreneurship research in emerging economies: a critical review and research agenda. Journal of Business Venturing 27(2): 266–290.
Kolk, A, Curran, L. 2017. Contesting a place in the sun: on ideologies in foreign markets and liabilities of origin. Journal of Business Ethics 142(4): 697–717.
Kostova, T, Zaheer, S. 1999. Organizational legitimacy under conditions of complexity: the case of the multinational enterprise. Academy of Management Review 24(1): 64–81.
Langbein, L, Knack, S. 2010. The Worldwide Governance Indicators: six, one, or none? Journal of Development Studies 46(2): 350–370.
Le, TV, O’Brien, JP. 2010. Can two wrongs make a right? State ownership and debt in a transition economy. Journal of Management Studies 47(7): 1297–1316.
Lu, JW, Beamish, PW. 2004. International diversification and firm performance: the S-curve hypothesis. Academy of Management Journal 47(4): 598–609.
Luiz, JM. 2015. The impact of ethno-linguistic fractionalization on cultural measures: dynamics, endogeneity and modernization. Journal of International Business Studies 46(9): 1080–1098.
Luo, XR, Zhang, J, Marquis, C. 2016. Mobilization in the internet age: Internet activism and corporate response. Academy of Management Journal 59(6): 2045–2068.
Luo, Y, Tung, RL. 2007. International expansion of emerging market enterprises: a springboard perspective. Journal of International Business Studies 38(4): 481–498.
Luo, Y, Tung, RL. 2018. A general theory of springboard MNEs. Journal of International Business Studies 49(2): 129–152.
Marquis, C, Raynard, M. 2015. Institutional strategies in emerging economy. Academy of Management Annals 9(1): 291–335.
McDougall, PP. 1989. International versus domestic entrepreneurship: new venture strategic behavior and industry structure. Journal of Business Venturing 4(6): 387–400.
Miletkov, M, Poulsen, A, Wintoki, MB. 2017. Foreign independent directors and the quality of legal institutions. Journal of International Business Studies 48(2): 267–292.
Oviatt, BM, McDougall, PP. 1994. Toward a theory of international new ventures. Journal of International Business Studies 25(1): 45–64.
Patel PC, Criaco, G, Naldi, L. 2018. Geographic diversification and the survival of born-globals. Journal of Management 44(5): 2008–2036.
Peng, MW, Sun, SL, Pinkham, B, Chen, H. 2009. The institution-based view as a third leg for a strategy tripod. Academy of Management Perspectives 23(3): 63–81.
Stuart, EA. 2010. Matching methods for causal inference: a review and a look forward. Statistical Science: A Review Journal of the Institute of Mathematical Statistics 25(1): 1–21.
Thomas, A, Bendixen, M. 2000. The management implications of ethnicity in South Africa. Journal of International Business Studies 31(3): 507–519.
Toh, PK, Miller, CD. 2017. Pawn to save a chariot, or drawbridge into the fort? Firms' disclosure during standard setting and complementary technologies within ecosystems. Strategic Management Journal 38(11): 2213–2236.
Wang, C, Hong, J, Kafouros, M, Wright, M. 2012. Exploring the role of government involvement in outward FDI from emerging economies. Journal of International Business Studies 43(7): 655–676.
Webb, JW, Pryor, CG, Kellermanns, FW. 2015. Household enterprise in base-of-the-pyramid markets: the influence of institutions and family embeddedness. Africa Journal of Management 1(2): 115–136.
Wooldridge, JM. 2015. Introductory Econometrics: A Modern Approach. South-Western: Mason, OH.
World Health Organization, UNICEF. 2017. Progress on drinking water, sanitation and hygiene: 2017 update and SDG baselines. https://apps.who.int/iris/bitstream/handle/10665/258617/9789241512893-eng.pdf [7 May 2019].
Yenkey, CB. 2015. Mobilizing a market: ethnic segmentation and investor recruitment into the Nairobi securities exchange. Administrative Science Quarterly 60(4): 561–595.
Zaheer, SA. 1995. Overcoming the liability of foreignness. Academy of Management Journal 38(2): 341–363.
Zahra, SA. 1996. Technology strategy and new venture performance: a study of corporate-sponsored and independent biotechnology ventures. Journal of Business Venturing 11(4): 289–321.
Zahra, SA, Ireland, RD, Hitt, MA. 2000. International expansion by new venture firms: international diversity, mode of market entry, technological learning, and performance. Academy of Management Journal 43(5): 925–950.
Zhou, L, Barnes, BR, Lu, Y. 2010. Entrepreneurial proclivity, capability upgrading and performance advantage of newness among international new ventures. Journal of International Business Studies 41(5): 882–905.
Zhu, H, Chung, CN. 2014. Portfolios of political ties and business group strategy in emerging economies: evidence from Taiwan. Administrative Science Quarterly 59(4): 599–638.
Zoogah, DB, Peng, MW, Woldu, H. 2015. Institutions, resources, and organizational effectiveness in Africa. Academy of Management Perspectives 29(1): 7–31.
Zyglidopoulos, S. 2016. Toward a theory of second-order corruption. Journal of Management Inquiry 25(1): 3–10.