OUTWARD FOREIGN DIRECT INVESTMENT AND FIRM INTERNATIONALISATION FROM SUB

304 Pages·2017·3.12 MB·English

by  Fasanya, Oludotun

OUTWARD FOREIGN DIRECT INVESTMENT AND FIRM
INTERNATIONALISATION FROM SUB-SAHARAN
AFRICA

by

OLUDOTUN A. FASANYA, BSc, PgDip, MILD, MIBF+

This Thesis is Submitted
to
Lancaster University Management School

In Partial Fulfilment of the Requirements for the Degree of
Doctor of Philosophy

The University of Lancaster
Lancaster, United Kingdom
June, 2018.

Supervisors: Dr Hilary Ingham and Dr Robert Read
Declaration
I declare that this thesis is my own work and that it has not been submitted in
substantially the same form for any other academic award.

i
Acknowledgements
Deep and sincere gratitude goes to my supervisors, Dr Hilary Ingham and Dr Robert
Read, for their dedicated and insightful supervision of this thesis. Throughout the whole
PhD journey, their insightful wisdom, support, encouragement, and guidance had a major
role to play in seeing it through. I gained so much knowledge from the various
discussions and debates related to the research and its findings, and I genuinely thank
both of them very much. I am also very grateful to Emeritus Professor V.
Balasubramanyam of Lancaster University for his immense acumen and valuable time,
which he made available to me whenever I required it. I am also very grateful to various
tutors in Lancaster Management School who have been supportive throughout the PhD
programme. I would also like to thank Dr Natalia Vershinina and Phil Wilson from my
alma mater, De Montfort University, UK, who cheerfully gave me sterling
recommendations to Lancaster University when I was commencing the doctoral
programme. I am also grateful to various senior academics that I met through the
Academy of International Business, UK, who all, in one way or another, provided words
of encouragement and guidance at various times during the programme. I am deeply
thankful to Sarah Patterson, the PhD office team, and the librarians at the university
library, who have all been very considerate throughout the programme. I am also very
grateful to the various senior business executives who went out of their way to share
critical information with me related to their firms’ internationalisation activities.
I would like to thank, most profoundly, the support and encouragement from my dear
wife Ayodeji and my children Adeiteoluwa, Dahunsioluwa, and Idunnuoluwa. Your love
and cheer motivated me to finish this thesis. I would also like to thank my dear siblings
Olu and Kayode and the entire Fasanya family, who have, as always, been very supportive
of this endeavour – I love and appreciate you very much. I would also like to cherish here
the memory of my very dear departed parents, Caroline Olabisi Fasanya (1934–2016) and
Samson Olusanya Fasanya (1931–2007). You both believed in me absolutely and without
ever wavering, and you always cheered me on through every step of my life while you
were here. This thesis is an honour to your good work as loving and nurturing parents.
Special thanks also go to my doctoral cohort and many others who have been supportive
throughout the programme. A great deal of thanks also goes to my in-laws, the Bolarinwa
family, who have been very supportive. I also say thank you to my other friends and
ii
associates who have contributed to my completing this course. Finally, I am forever
grateful to God Most High, who gave me the grace and ability to persevere until the end.
iii
Abstract
Sub-Saharan Africa (SSA) is a region with a population of over 1 billion people and
abundant natural resources. With a current GDP of about US$1.6 trillion and an average
GDP growth of about 5% over the last decade, it is fast developing into a vibrant
business region. Its firms are also rapidly evolving to become competitive international
players. With immense potential, SSA is one of the last unexplored frontiers of business,
and conducting research into its emerging OFDI and internationalisation phenomenon is
both interesting and important. Adopting an inductive methodology, this thesis explores
the phenomenon at both country and firm levels through the use of a funnel approach.
Specifically, this research investigates the important OFDI push and pull influencing
factors, and the internationalisation process of indigenous firms described as SSA MNEs.
It also examines the relevance of FDI and internationalisation theories to SSA. Based on
a detailed literature review and conceptual foundations, a broad range of OFDI factors
were developed into a comprehensive OFDI framework of twenty push and pull factors
for SSA. In a subsequent firm-level analysis, this framework was used to underpin
qualitative case studies from firms in South Africa, Nigeria, and Kenya, and interviews
were conducted with senior executives. Case findings reveal fourteen influential push and
pull factors in the region, with enterprise strategy and market growth being the most
important push and pull factors respectively. The results also show that the
internationalisation of SSA MNEs occurs through an incremental process that takes time,
with patterns indicating the use of either systematic or unsystematic international market
selection methods. For the purpose of subsidiary control, locational fit, and risk
mitigation, SSA MNEs use a mixture of foreign market entry modes, such as greenfield
investment, joint ventures, and licensing. Traditional FDI and international business
theories relevant to SSA are identified, and it is found that several emergent approaches
find support including the ‘firm resilience capabilities’ argument of this thesis. Based on
general findings and syntheses, the thesis advances a taxonomy of SSA MNE’s which
outlines internationalising firms from the region as market growth optimisers, strategic
asset aggregators, networks consolidators, or low-cost market converters.
With regard to the enhancement of market growth, the findings indicate the importance
of openness to trade to internationalising SSA firms. The thesis therefore considers the
impacts of Brexit on SSA MNEs with EU operations and recommends they develop
iv
strategies that will mitigate the risk of potential export trade limitations and market
fragmentation after Brexit. Such firms providing financial services in the UK should also
restructure their legal entities to accommodate potential changes to EU financial passport
conditions after Brexit. Generally, SSA MNEs carrying out OFDI should deploy
enterprise strategies that allow for both the reduction of deficiencies in institutional
mechanisms and for the leveraging of their resilience capabilities for market growth.
Overall, the thesis suggests that it enhances the international business discourse and it
makes an original contribution to the understanding of OFDI and internationalisation
from SSA.

v
Table of Contents

Declaration .............................................................................................. i
Acknowledgements ................................................................................ ii
Abstract ............................................................................................ iv
List of Tables ......................................................................................... xi
List of Figures...................................................................................... xiii
List of Abbreviations ............................................................................ xv
Chapter 1: Introduction to the Study ......................................................1
1.1 Research Aims ........................................................................................................ 2
1.2 Research Questions ................................................................................................ 2
1.3 The Research Methodology .................................................................................. 3
1.4 Overview of the Thesis ......................................................................................... 5
Chapter 2: Theories and Approaches to Foreign Direct Investment
and Firm Internationalisation ............................................ 8
2.1 FDI Definition and Foundation .......................................................................... 9
2.1.1 Control in FDI ..................................................................................................... 10
2.2 FDI Macro Theories and Approaches .............................................................. 11
2.3 Micro-Economic Theories and Approaches .................................................... 13
2.3.1 Industrial Organisation and Market Imperfection Theories .......................... 13
2.3.2 Transaction Cost and Location Theories ......................................................... 15
2.3.3 Interdependence Theory ..................................................................................... 17
2.3.4 Internalisation Theory ......................................................................................... 18
2.3.5 Competitive Advantage: Environmental- and Resource-Based Views ........ 19
2.3.6 Typologies ............................................................................................................. 20
2.4 Firm Internationalisation Approaches and Frameworks ............................... 23
2.4.1 Stages/Behavioural Approaches ........................................................................ 23
2.4.2 Innovation Models ............................................................................................... 25
2.4.3 The Contingency, Business Strategy, and Network Approaches .................. 25
2.4.4 The International Market Selection (IMS) and Foreign Market Entry Mode
Approach ............................................................................................................... 27
2.4.5 The Product Life Cycle (PLC) Approach ......................................................... 29
2.4.6 Strategic Management and Structure Approaches .......................................... 30
2.4.7 The OLI Framework ........................................................................................... 31
2.5 Emerging Markets Theories and Approaches ................................................. 34
2.5.1 IDP ......................................................................................................................... 34
2.5.2 Developing Country OFDI Approaches .......................................................... 35
vi
2.5.3 EMNE Internationalisation Strategies .............................................................. 36
2.5.4 Linkage, Leverage, and Learning (LLL) ............................................................ 38
2.5.5 The Springboard Approach ................................................................................ 39
2.5.6 New International Ventures (NIV) ................................................................... 40
2.5.7 Global Factory ...................................................................................................... 41
2.6 SSA OFDI Literature .......................................................................................... 41
2.7 Firm Resilience Capabilities: An Emerging Argument ................................... 47
2.8 Summary and Conclusion ................................................................................... 49
Chapter 3: Research Methodology ........................................................ 51
3.1 Philosophical Overview ...................................................................................... 51
3.1.1 Epistemology and Ontology ............................................................................... 52
3.1.2 Positivism and Interpretivism ............................................................................ 52
3.1.3 Realism and Pragmatism ..................................................................................... 53
3.2 Methodological Approaches ............................................................................... 54
3.2.1 Deduction and Empiricism................................................................................. 55
3.2.2 Inductivism............................................................................................................ 55
3.3 Research Strategy.................................................................................................. 56
3.3.1 Case Studies and the Inductive Methodology of the Research ..................... 57
3.4 Data and Methods ................................................................................................ 59
3.4.1 Case Selection Method ........................................................................................ 59
3.4.2 Interviews Method ............................................................................................... 59
3.4.3 Template Analysis Method ................................................................................. 60
3.4.4 Interview Guide and Pilot Study ........................................................................ 61
3.5 Limitations and Ethics ......................................................................................... 62
3.5.1 Limitations ............................................................................................................ 62
3.5.2 Ethics ..................................................................................................................... 63
3.6 Conclusion ............................................................................................................ 63
Chapter 4: Outward Foreign Direct Investment from Sub-Saharan
Africa: Country Studies, Conceptual Foundations, and
Influencing Factors .......................................................... 65
4.1 OFDI Flows and Research from the Sub-Saharan African Region ............. 66
4.2 South Africa .......................................................................................................... 70
4.2.1 OFDI Flows from South Africa ........................................................................ 70
4.2.2 South African Greenfield FDI and Mergers and Acquisitions...................... 71
4.3 Nigeria .................................................................................................................... 74
4.3.1 OFDI Flows from Nigeria .................................................................................. 74
4.3.2 Nigerian Greenfield FDI and Mergers and Acquisitions ............................... 75
4.4 Kenya ..................................................................................................................... 78
vii
4.4.1 OFDI Flows from Kenya ................................................................................... 79
4.4.2 Kenyan Greenfield FDI and Mergers and Acquisitions................................. 79
4.5 Conceptual Foundations ..................................................................................... 82
4.6 Framework Pathways and Theoretical Linkages ............................................. 83
4.7 OFDI Push and Pull Factors Influencing SSA ................................................ 93
4.7.1 Pull Factors ........................................................................................................... 93
4.7.2 Push Factors.......................................................................................................... 99
4.8 Toward a Holistic SSA OFDI Framework .................................................... 106
4.8.1 The SSA OFDI Framework ............................................................................. 106
4.8.2 Applying the SSA OFDI Framework ............................................................. 108
4.9 Summary and Conclusion ................................................................................. 109
Chapter 5: Firm Internationalisation in Sub-Saharan Africa: Five Firm
Case Studies ..................................................................... 111
5.1 Outline of the Case Studies .............................................................................. 111
5.1.1 Organisation of the Case Studies ..................................................................... 112
5.1.2 Interviews and Interviewees ............................................................................. 113
5.1.3 Determining the Influence of Push and Pull Factors ................................... 114
5.2 Overview of the Five Firms .............................................................................. 115
5.2.1 Applying the SSA OFDI Framework ............................................................. 118
5.3 Tiger Brands ........................................................................................................ 118
5.3.1 Tiger Brands Internationalisation Process and Market Selection Patterns 119
5.3.2 Tiger Brands Pull Factors ................................................................................. 120
5.3.3 Discussion of Pull Factors ................................................................................ 121
5.3.4 Tiger Brands Push Factors ................................................................................ 122
5.3.5 Discussion of Push Factors .............................................................................. 126
5.3.6 Tiger Brands’ Market Entry Modes and Processes ....................................... 126
5.3.7 Summary of Tiger Brands’ Case Study............................................................ 127
5.4 Globacom (Glo) ................................................................................................. 128
5.4.1 Globacom Internationalisation Process and Market Selection Patterns .... 129
5.4.2 Globacom Pull Factors...................................................................................... 130
5.4.3 Discussion of Push Factors .............................................................................. 139
5.4.4 Globacom Market Entry Modes and Processes ............................................ 140
5.4.5 Summary of Globacom’s Case Study .............................................................. 140
5.5 Asset & Resources Management (ARM) ........................................................ 141
5.5.1 ARM Internationalisation Process and Market Selection Patterns ............. 142
5.5.2 ARM Pull Factors ............................................................................................... 143
5.5.3 Discussion of Pull Factors ................................................................................ 146
5.5.4 ARM Push Factors ............................................................................................. 147
viii
5.5.5 Discussion of Push Factors .............................................................................. 151
5.5.6 ARM Market Entry Modes and Processes ..................................................... 152
5.5.7 Summary of ARM’s Case Study ....................................................................... 154
5.6 Access Bank ........................................................................................................ 154
5.6.1 Access Bank Internationalisation Process and Market Selection Patterns 155
5.6.2 Access Bank Pull Factors .................................................................................. 156
5.6.3 Discussion of Pull Factors ................................................................................ 159
5.6.4 Access Bank Push Factors ................................................................................ 160
5.6.5 Discussion of Push Factors .............................................................................. 163
5.6.6 Access Bank Market Entry Modes and Processes ......................................... 164
5.6.7 Summary of Access Bank’s Case Study .......................................................... 165
5.7 Mi-Fone Telecommunications ......................................................................... 166
5.7.1 Mi-Fone Internationalisation Process and Market Selection Patterns ....... 167
5.7.2 Mi-Fone Pull Factors ......................................................................................... 168
5.7.3 Discussion of Pull Factors ................................................................................ 170
5.7.4 Mi-Fone Push Factors ....................................................................................... 170
5.7.5 Discussion of Push Factors .............................................................................. 175
5.7.6 Mi-Fone Market Entry Modes and Processes................................................ 176
5.7.7 Summary of Mi-Fone’s Case Study ................................................................. 177
5.8 Case Study Findings, Theoretical Links, and Relevance .............................. 177
5.8.1 Pull Factors ......................................................................................................... 178
5.8.2 Push Factors........................................................................................................ 182
5.9 Summary and Conclusion ................................................................................. 187
Chapter 6: Firm Internationalisation in Sub Saharan Africa; Cross-
Case Analysis of Firm Case Studies ................................ 189
6.1 The Methodology and Model of Cross-Case Analysis ................................. 189
6.2 A Cross-Case Analysis of Pull Factors in SSA Firm Internationalisation . 190
6.3 A Cross-Case Analysis of Push Factors in SSA Firm Internationalisation 203
6.4 Cross-Case Study Comparison of the Push and Pull Factors in Firm
Internationalisation ............................................................................................ 216
6.5 Cross-Case Study Comparison of Push and Pull Factors by Sector ........... 219
6.5.1 Consumer Goods Manufacturing Sector ........................................................ 219
6.5.2 Telecommunications and Mobile Telephony Sector .................................... 220
6.5.3 Banking and Financial Services Sector ............................................................ 221
6.5.4 Summary .............................................................................................................. 223
6.6 SSA Firm Internationalisation: Key Findings and Implications .................. 223
6.6.1 The Taxonomy of SSA MNEs ......................................................................... 224
6.6.2 Internationalisation Structure and Research Propositions ........................... 225
ix