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To engage or not? An exploratory case study on how multinational enterprises can engage with development finance institutions to promote host country industrialization in Africa.

posted on 2021-02-02, 12:18 authored by Thandeka Molakeng

Nonmarket strategy presents alternative strategies that firms can use to create value, yet, most nonmarket studies have not considered multinational enterprises (MNEs) and development finance institutions’ (DFIs) engagement and how they can promote host country development in Africa. This study, therefore sought to understand how MNEs could engage with DFIs to drive host country industrialization, using sustainable development goal number nine (SDG-9) as an organising principle.

Based on an exploratory case study, 15 participants from the MNE and its subsidiaries, DFIs and experts were interviewed. Scholars have been calling for a better understanding of how MNEs engage with external stakeholders in addressing socio-economic issues in emerging countries. This study has therefore contributed by shedding light in this respect. The study found that, i) The host country’s industrialization, through foreign direct investment (FDI), is a consequence of a good investment climate and therefore improbable to happen as a result of a nonmarket strategy. ii) To drive industrialization, Africa must have an integrated infrastructure that dissuade elitism and supports small and medium-sized enterprises and industrialization. iii) MNE subsidiaries operating in Africa are no different from start-ups and host country institutions must be cognisance of this in how they engage with subsidiaries in Africa. iv) Managing complexity and available flexible finance is key in managing successful partnerships between MNEs and DFIs.

This study provides useful details to the nuances that are important in engaging in nonmarket strategies that have not been considered for MNEs operating in Africa. It brings to light the constraints of multiple embeddedness of subsidiaries operating in Africa and their battles as they seek to engage in nonmarket strategies. Further, the study contributes to the nonmarket strategy literature by considering DFIs as important actors in driving development within Africa.



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