Corruption distance and the equity-based foreign entry strategies of multinational enterprises in sub-Saharan Africa

Ling Liu (), Jose Godinez (), John Henley () and J. Mauricio Galli Geleilate ()
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Ling Liu: University of Edinburgh Business School
Jose Godinez: University of Massachusetts, Lowell
John Henley: University of Edinburgh Business School
J. Mauricio Galli Geleilate: University of Massachusetts, Lowell

Journal of International Business Policy, 2023, vol. 6, issue 4, No 6, 492-510

Abstract: Abstract We build on the corruption and legitimacy literature to propose specific means of collaboration between multinational enterprises and home- and host-country policymakers to reduce engagement in corruption when entering sub-Saharan Africa. Our analysis shows that multinationals choose entry modes to balance their need for internal and external legitimacy and how the entry modes may be affected by their investment motives. Our study supports that corruption distance is positively associated with the formation of joint ventures, which calls for policymakers to prioritize oversight of the partnership of the foreign firm and the local partner. We also provide a framework for assessing how the influence of corruption distance on entry mode varies across different investment motives. Specifically, we argue that market-seeking investment is likely to be associated with a wholly owned subsidiary entry mode, and as such, policymakers should focus on the strength of internal anti-corruption controls. Conversely, resource-seeking MNEs are more likely to enter via joint ventures, and thus policymakers should require foreign firms to disclose their potential partners in the host country and the terms of their partnership.

Keywords: sub-Saharan Africa; entry mode; corruption distance; institutional theory; legitimacy (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (1)

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DOI: 10.1057/s42214-023-00158-z

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