The impact of Institutional Quality on MNCs strategies when conducting FDI in Sub-Saharan Africa

Abstract

An important part for the future economic development in Sub-Saharan Africa is the inflowof foreign direct investments. One factor in attracting these investments is having a suitableexternal environment that fits the requirements of the firm, therefore an interdependentrelationship exists between the two. In this research, the external factor, institutional quality, will be in focus. The purpose of this research is to see how Multinational Corporations, that have conducted foreign direct investments in Sub-Saharan Africa, have been influenced by institutional quality in their strategic process. This is answered through qualitative interviews with Multinational Corporations that have shared their insight and experiences. The theoretical field has its roots in both the strategic- and international business field. The analysis suggests that firms that have investigated the market, have previous experience from internationalizing or experience and knowledge from the target market can conduct a more deliberate strategic decision making. Therefore, intentions have been realized to a greater extent, despite the external forces in terms of institutional quality. Further, the firms that did not possess these internal knowledge or resources, mentioned above, have had a more experimental strategic approach. From this, we draw the conclusion that institutional quality has affected the firm's strategic decision making in a more emergent way. We have also seen tendencies that some of the participating Multinational Corporations are reluctant to work toward the public sector and overly intervening authorities in Sub-Saharan Africa.