Investing in emerging markets: An analysis of the institutional
challenges facing the members of the Netherlands-African
Business Council
Amsterdam MBA Wale Shasanya
August 2015 10853154
Executive Summary
There is unparalleled focus today on emerging markets both as a result of the on-going stagnation in Western economies but also due to the resilience in economic growth in many BRICS/MINT countries. However the institutional context in these countries still represent formidable challenges but also opportunities for foreign and domestic investors. In this paper I will focus on the experience of the Netherlands-African Business Council (NABC) in assisting its members in building sustainable business opportunities in Africa.
NABC is the leading network organisation in the Netherlands providing a platform for Dutch expertise to contribute to socio-economic development in a range of sectors. Although a relatively small organisation in terms of staff strength (15 full-time staff) its extensive network allows it to offer a range of specialised services to both its Dutch and African stakeholders. Its inwards and outwards trade missions, supported by both the Dutch Ministries of Foreign Affairs and Trade and Cooperation, its consulting services and strategic programmes constitute the majority of the value adding services offered by the NABC.
Infrastructure development support is a key focus area and through its strategic programme platform NABC offers an oil and gas infrastructure roundtable (RT) that seeks to position Dutch private sector firms to benefit from Africa’s infrastructure deficit. However these high capex investments are often subject to long contract cycles, policy and regulatory uncertainty, political interference and socio-environmental resistance. At the same time new sources of FDI, mainly non-Western, are increasingly crowding out traditional Western source of finance and technology whilst adding additional layers to the traditional North-South institutional void that has been the subject of academic research. As a result of these pressures NABC would like to review these strategic programmes, within a wider organisational context, to ensure that it is delivering value to its members.
Table of Contents
I. Introduction: Africa today
II. Framing: useful analytical frameworks A. Defining institutions
B. New institutional economics C. Cross-national distance D. Institutional voids
E. Institutional hazards & MNE activity F. Mental models on emerging markets III. Case Description: NABC
A. Organizational Overview B. NABC Strategic Programmes C. NABC Oil and Gas Roundtable D. Research Methodology
E. Case Question IV. Analysis and Discussion
A. Institutions
B. Cross-national distance
C. Institutional hazards & MNE activity D. Mental models on emerging markets V. Recommendations
VI. Conclusion VII. References
I. Introduction: Africa today
Intermediary and membership based organisations are playing a key role in helping multinational enterprises understand the institutional landscape in developing countries and therefore position themselves for success. In this paper I will review the conceptual frameworks applicable to institutional theory, situate this within the experience of the members of the leading Dutch business intermediary organisation and identify concrete recommendations that are applicable to both the NABC and other intermediary organisations. Varying levels of institutional capacity are a key barrier to business at a global level and specifically in Africa. This provides a space for the likes of the NABC to guide Dutch businesses and African entrepreneurs seeking to establish business relationships between Africa and the Netherlands. Overcoming the specific institutional barriers related to doing business in Africa is the ‘raison d’etre’ of the NABC and yet many of the recommendations inherent in this work are also applicable beyond the NABC case. It is my hope that this analysis will be a solid contribution to the subject matter and aid in facilitating trade between the Netherlands and Africa.
The International Monetary Fund's (IMF) 2014 World Economic Outlook (WEO) made headlines due to its assessment that the world economy might never revert to the pace of expansion prior to the 2008 global financial crisis http://www.imf.org/external/pubs/ft/weo/2014/02/. It reduced its global growth forecasts for 2014 to 3.3% and for 2015 to 3.8%, both downgrades from prior expectations. However the IMF considers Africa to be the bright spot on the horizon. Its projected real GDP percentage growth in 2014 shows that six of the top 10 countries, and 11 of the top 20 are African and the spread of the growth story highlights some notable ‘new’ names https://www.imf.org/external/pubs/ft/reo/2014/afr/eng/sreo1014.pdf .
Historically, and with the exception of natural-resource seeking FDI, most portfolio investment into Africa has gone into South Africa, or Nigeria, with Egypt pre-revolution, also being popular and Kenya, Morocco, Ghana attracting increasing attention. Whilst
none of these countries appear in the top 10 Nigeria, the only one in the top 20, ranks 17th. The usual and new oil and gas players (Chad, Tanzania, Mozambique, Ghana), mining players (the DRC and Sierra Leone), soft commodities holders (Cote d’Ivoire) and relative outlier, Ethiopia, feature.
Fig 1. Common Sense Advisory
Africa is the second largest continent in the world in terms of both land area and population (Figure 1). It is a large and diverse continent comprised of 54 countries with a landmass larger than the collective landmass of the United States, China, and India. By 2020, the continent’s GDP is projected to climb to $2.6USD trillion, which is equivalent to the current size of the Indian and Russian economies combined (FMO, 2014). Consumer spending is also expected to reach $1.4USD trillion by that time and the number of African households with discretionary income is projected to reach 128 million – more than the total number of households currently in the United States.
The IMF says: “Economic activity in sub-Saharan Africa (SSA) has continued to grow robustly - on the back of supportive external demand and strong growth in public and private investment - and the outlook is expected to remain favourable for the lion’s share of the region’s countries” (IMF, 2014). Renowned Africa development scholar, John Luiz surmises in his review of South Africa and its economic relationship with the rest of SSA, that the reasons for the growth surge are multifaceted and whilst there may be some common strands, they cannot be generalized due the heterogeneity inherent in a continent with 54 countries. However he states that “civil conflict has declined and relative political stability has improved. Better macroeconomic conditions e.g. inflation dropped from 22% in the 1990s to 8% after 2000; foreign debt declined by 25% and
budget deficits by 60%. Several key markets have been re-invigorated through privatization (e.g. Nigeria alone privatized more than 116 enterprises between 1999 and 2006), increased openness to trade; lowered corporate tax rates, strengthened regulatory systems and improved physical and social infrastructure. Relative improvements in macro level political stability have also occurred. Since the early 1990s, direct multiparty elections have been held in more than 40 sub-Saharan countries (Luiz, 2015).
According to the International Labour Organisation
(http://www.ilo.org/global/regions/africa/lang--en/index.htm) the demographic outlook is bright with Africa’s labour force projected to grow by 122 million during this decade and will be the largest in the world by 2035. Additionally 70% of Africa’s population is under 30 and by 2030 40% of the world’s population growth will be African (Chrironga et al, 2011). Standard Chartered, the Mckinsey Global Institute and the United Nations estimate that Africa’s middle class will triple in size by 2035 with their related disposable incomes rising well above subsistence levels. They also estimate that Africa offers the highest returns on FDI in the world, far exceeding all other regions, and its low underutilized resource endowment means that its lack of competitiveness remain a positive latent potential (Mckinsey, 2014). Ernst & Young’s 2014 Global Attractiveness Survey estimates that Africa’s share in global FDI projects increased to an all time high
of 5.7% for a total of USD $56.3bn USD
(http://www.ey.com/Publication/vwLUAssets/EY-2014-european-attractiveness-survey/$FILE/EY-2014-european-attractiveness-survey.pdf). Most recently the discourse around Africa has been one of a continent “Rising” and President’s Obama July 2015 visit to Ethiopia and Kenya speak to many of the areas highlighted above (https://www.whitehouse.gov/the-press-office/2015/07/28/remarks-president-obama-people-africa) .
Yet challenges still remain. The IMF, despite its positive macro level prognosis, also sees challenges. It has highlighted a rapid build-up of fiscal vulnerabilities in numerous countries, increasing security threats, public health weaknesses and the risk caused by
a tightening in global financing conditions, not least China economic slowdown and its related impact on demand for Africa’s natural resources. John Luiz and Callum Stewart in their review of corruption, institutions and MNE’s in Africa note that corruption is a source of uncertainty and additional transaction costs for MNE that necessitates a strategic response (Luiz & Stewart, 2014). According to Transparency International’s (2014) Transparency Corruption Perception Index, SSA, has a regional average corruption score of 3.3 out of a maximum score of ten (with one being highly corrupt). Political stability and its relationship with good governance also remains a critical determinant of Africa’s growth. It is noted that the problems facing African countries are not framed solely as economic or cultural issues but mostly as political issues; poor development is argued to result primarily from poor governance and within the African context it is hard to find an example of an authoritarian regime that has achieved good socio-economic outcomes (Ngobo and Fouda 2012, p.g. 436).
Undoubtedly Africa offers many opportunities for foreign investors and whilst Prahalad and Hart’s (2002) assessment of the “Bottom of the Pyramid” has almost now transitioned into mainstream development discourse there remain many challenges related to doing business in Africa. As a result I believe that it is only fair to present a balanced view of Africa today as a segway into a deeper analysis of the institutional context and that role that it has played in fostering Dutch investment in Africa from the perspective of the NABC.
II. Framing: useful analytical frameworks
Institutions represent the implicit or explicit rules that increase the predictability of human behaviour in economic activity (North, 1991) and maximise wealth based on economic interactions. Emerging markets are defined by the volatility and lack of predictability in economic activity relative to developed markets (Khanna & Palepu, 2012 and Luiz & Callum, 2012). It is my hope that a conceptual review of the role that institutions play in inhibiting or enhancing business will be useful to intermediary
organisations that seek to facilitate trade between home and host economies. I have developed a logical flow to the analytical framework - North (1991) and Williamson’s (2000) papers set out the foundation of institutional theory, Berry et. al (2010) introduce the notion of the dimensions of cross-national distance, Khanna & Palepu (2012) and Slangen & Beugelsdijk (2010) focus on the institutional context in emerging markets. Finally Dhanaraj & Khanna (2011) outline the critical changes that MNE management can make to their ‘mental-models’ in order to succeed in emerging market institutional contexts. I will apply these analytical concepts and frameworks to the qualitative research conducted as part of this paper and develop recommendations that are equally applicable to NABC and other intermediary organisations.
A. Defining institutions
Institutions are the humanly devised constraints that structure political, economic and social interaction. They consist of both informal constraints (sanctions, taboos, laws and codes of conduct), and formal rules (constitutions, laws, property rights). Institutions have been devised to create order and reduce uncertainty in exchange (North, 1991 p.g. 97). This often quoted definition is a useful anchor to situate this analysis and in its barest form still has relevance for the raison d’etre or strategy of intermediary business organisations. North’s review of economic history assumes that individuals are driven by wealth-maximising behaviour and shows how over time transaction costs related to economic exchange have been impacted by asymmetries in information between stakeholders. The glue holding the actors together are “effective institutions that raise the benefits of cooperative solutions or the cost of defection” (North, 1991 p.g. 98). However over time the expansion of trade has shifted from local exchange through to global transactions. These are supported not only by institutional ‘rules of the game’ (Peng, 2002) but also by specialization and the division of labour. Interestingly North’s analysis of economic exchange can be applied directly to the Netherland’s historical commercial relationships with the African continent. The establishment of the Dutch West India Trading Company and its exploitative linkages with the slave trade are today seen, at least from the African perspective, in terms of the potential for conflict that
persists when people “do not have an intimate understanding of each other, and the threat of violence is a continuous force for preserving order because of its implications for other members of society (North, 1991 p.g. 99). In more recent times ideally every economy would provide a range of institutions to facilitate the functioning of markets, but developing countries fall short in a number of ways (Khanna and Palepu, 2010 p.g. 6). Hence these institutions and specialized intermediaries, provide the network, expertise and positioning skills required by their constituents.
North identifies distinct transaction cost problems related to global trade. Agency problems arise when the motivations of the trading parties are difficult to determine without costly oversight. The risk of contract [re] negotiation and enforcement arise when there is no easily available way to achieve agreement and enforce contracts because personal ties and more complex and impersonal forms of exchange emerge. When related to the intermediary organisations the question emerges of how in the 21st century can an entity, which is an institution with its own set of strategic management, funding and human resource challenges, help its members span the institutional void? Khanna & Palepu (2012) identify three critical market failures that are critical to this task:
● Unreliability of market information
● Information asymmetries and incentive conflicts between buyers and sellers ● Uncertain regulatory environments and inefficient judicial systems
In order to correct these failures a variety of formal and informal intermediary organisations have arisen to distribute market information on opportunities, improve knowledge, skills and the bargaining power of their constituent members. Lem, Tulder & Geleynse’s (2013) guide to doing business in Africa, which is written from a Dutch perspective but is applicable to any interested investor, is an important strategic guide that seeks to unpack the institutional ‘eyesight problems’ that prevent firms from seeing the opportunities that exist. The extent to which NABC continues to fulfill this role is a key element of my research and will be explored to determine the extent to which its
members feel that the market failures inherent in the institutional void between the Netherlands and Africa are being sufficiently navigated. Pertinent questions to be considered for any organisation are, ‘does it possess the required level of knowledge and skills to effectively advise and position its members?’. However it is important to situate this analysis in North’s work on the evolution of economic relationships at different spatial and historic levels.
B. New institutional economics
Williamson’s New Institutional Economics (NEI) provides a framework of social analysis to chart the evolution of formal and informal institutions and the related social consequences over time (Figure 2). He argues not only that “institutions do matter” but also that “the determinant of institutions are susceptible to analysis by the tools of economic theory” (Williamson, 2000 p.g. 595). By outlining the determinants of institutional change there is an attempt to ‘break ignorance’ about institutions by developing four level of analysis that are interconnected. Each level either constrains subsequent levels or provides input into preceding levels. Put simply NEI provides a logical basis to view how societies evolve, the time lag involved and the overall objectives of each social level.
Fig. 2 Economic of Institutions
Level 1 describes the top level of social embeddedness where norms, customs, traditions and religion play a key role in supporting socio-economic exchange. Institutional evolution at this stage displays a great deal of inertia and takes shape over millennia. This level is characterised more by informal institutions and Williamson suggests that this foundational layer has a lasting grip and influence on the way a society conducts itself.
Level 2 goes beyond the informal constraints and introduces the formal rules “constitutions, laws, property rights” and design instruments of modern government. These include the executive, legislative, judicial and bureaucratic functions of government. It is predicated on the belief that for efficient exchange and private enterprise to occur governments must establish the ‘rules of the game’. Resources will then be allocated to their highest bidders as markets assume their role of assigning scarce resources to the highest bidder with the government stepping aside. Although in reality market failures regularly occur even when Level 2 institutions are present; resulting in the executive arm of government having to step into the breach e.g. the 2008 financial crisis and subsequent US government bail out.
Level 3 emerges when societies move beyond the ‘rules of the game’ (property) to include the ‘play of the game’. The institutions of governance are assessed critically to see what role they play. Hence we move beyond the mere existence of the contract into the realm of how the contract is executed and the resulting relationships between contracting parties. Williamson’s key recommendation at this level is the importance of getting the governance structures right and reviewing this activity on a more frequent basis; within a year to a decade.
Level 4 is the level at which neoclassical theory prevails and where the market constantly readjusts in real time to allocate resources. Williamson adds that adjustments to prices and output occur more or less continuously and are supported by efficient risk-bearing and incentive alignment.
THE NIE framework is a useful framework to situate the case question. According to Wan the use of institutional theory has increased most in studies of business strategy in the emerging markets that are characterised by poorer institutional frameworks (Wan, 2005). Likewise national institutional environments in Africa (like Asia) will influence the foreign investment, entry option, product and geographic decision choices of the members (Meyer and Nguyen, 2005). An organisation’s role in unpacking or
demystifying the institutional void for its members, within the context of the NIE framework, is most applicable to Levels 2 - 4. Articulating and mapping the formal institutional environment and stakeholders at all levels of formal government, in the Netherlands and Africa, but also of civil society is a service that organisations, through their network as well as underlying institutional knowledge, should be able to provide its members. That extends also to playing a supportive role in ensuring that contractual rights and privileges are respected either via indirect or indirect mediation or dispute resolution. This will ensure that its members that are “parties to a contract who look ahead, recognize potential hazards, work out the contractual ramification, and fold these into ex ante contractual agreement obviously enjoy advantages over those who are myopic or who take their chances or knock on wood” (Williamson, 2000 p.g. 601) Additionally the time frame (continuous - 100 yrs) articulated by Williamson for Level 2 - 4 institutional change is compatible with the time frame of support provided by business facilitation intermediaries.
C. Cross-national distance
A logical addition to the analysis of institutional voids is Berry, Guillen & Zhou’s approach to institutional distance. They acknowledge that international business and research use cross-national distance as an explanatory variable to firm decisions in investing in particular countries, the phasing of market entry and the choice of entry mode (Berry, Guillen & Zhou, 2010 p.g. 1460). In particular entry mode decisions play a key role in the management of institutional risks in Africa given that local legislation often mandates that international investors partner with local entities under local content regulations. The response to the transaction cost of foreign mode entry will be reviewed in the context of how firms manage to identify and monitor the in-country institutional hazards (Yiu and Makino (2002) & Thompson, (2012). Dunning also alludes to cross-national distance in the form of geographic, economic, social and political differences and the resultant availability of information that firms can base their entry mode decisions upon (Dunning, 1993).
Berry, Guillen & Zhou focus on three elements of cross-national institutions: national business systems, national governance systems and national innovations systems in order to explore how countries differ in multiple dimensions. National business systems refer to the difference in economic, financial and administrative practices that affect managerial thinking. National governance systems are the incentives, safeguards and dispute-resolution processes used to protect the interests of corporate stakeholders. These are of particular importance in the African context given that government institutional capacity varies and the fact “governance dimensions are relevant to managerial decision-making, because firms need to establish relationships with [government] stakeholders in order to operate in a given country” (Berry, Guillen & Zhou, 2010 p.g 1464). National innovation systems refer to to the differences in how countries develop knowledge and how this sets them apart from or connects them to other countries.
Berry, Guillen and Zhou provide a comprehensive framework of indicators that point to the types of differences that exist between two points. They have identified nine dimensions (Table I) and have expanded these to include more than the usual economic, financial and cultural elements. They have grounded them in both academic research and empirical studies that are focussed on international business.
Table I Dimension of cross-national distance Dimension of
Distance Definition Variables
Economic Differences in economic development and macro
economy GDP per capita, GDP deflator, exports & imports as % of GDP Financial Differences in financial sector development Domestic credit to private, mkt cap as % of GDP,
no of listed firms (per 1 million population) Political Difference in political stability, democracy, and
trade bloc membership Political stability measured by veto power, democracy score, government consumption (% of GDP), membership in WTO, membership in same trade bloc
Administrative Difference in colonial ties, language, religion and
legal system Shares a colonial tie, % of population that share same language or religion, Share same legal system
Cultural Differences in attitude toward authority, trust,
individuality, and importance of work and family Questions on obedience & respect for authority, trusting people and job security, independence and role of government, importance of family and work
Demographic Differences in demographic characteristics Life expectancy at birth, Birth rate, Population ages 0-14 & 65+ (% of total)
Knowledge Differences in patent and scientific production Number of patents & scientific articles per 1 million population
Connectedness Differences in tourism and internet use International tourism, expenditures & receipts (%GDP), Internet users per 1000 people Geographic Great circle distance between geographic center of
countries Distance between two countries according to geographic centre The nine dimensions provide a detailed and practical framework for corporate decision-makers to use in “scanning, interpreting and analysing the international business environment” and overcoming their liability of foreignness (Sethi & Guisinger, 2002). I would argue that Sethi and Guisinger’s holistic model of MNE strategy and performance should be based on the raw data that will emerge from Berry, Guillen & Zhou’s cross-national framework and should inform the development of corporate strategy for the international business environment. Berry, Guillen & Zhou’s results show the limitations of using a distance variable that is based only on a cultural dimension and also the need to include numerous dimensions when analyzing the influence of distance. They show both positive and negative correlation effects, suggesting that additional research can usefully explore in more detail the impact of distance on various organizational and business variables (Berry, Guillen & Zhou, 2010 p.g. 1477).
D. Institutional voids
Khanna and Palepu (2010) are the eminent authorities in the application of institutional analysis to emerging markets. Their analysis follows on logically from the historical foundation provided by North and Williamson’s work. A review of the recent academic literature on the subject is full of reference to their identification of the term ‘institutional
voids’. Khanna and Palepu recognise two key trends: that business and government are increasingly convinced that emerging markets with the drivers of global economic growth. This is in the context the Dutch Ministry of Foreign Affairs and Trade & Economic Cooperation’s transition from a focus on bilateral aid to the active promotion of Dutch trade on the continent. Secondly they note that emerging markets can provide lessons on innovations, products and services that can be relevant for more mature markets in the West, as global consumers converge in preference for cost and value. Emerging markets are classified not from the perspective of growth potential or size but from the perspective of the institutional infrastructure and an investor's ability to exploit it. Hence this is where specialized intermediaries in capital, product and labor markets are absent or poorly functioning, throwing up opportunities for firms that are able to develop a granular understanding of the market structure. These market structures are defined by ‘the ease with which buyers and sellers can come together” and where “requisite information and contract enforcement” are lacking (Khanna and Palepu, 2012 p.g. 174). Others have attempted to define institutional voids or distance from the perspectives of differences in language, education, business practices, culture and industrial development (Johanson and Vahlne, 1977 p.g, 24) or develop an understanding of distances between countries using Hofstede’s cultural constructs of uncertainty avoidance, power distance, individualism and masculinity (Hofstede, 1980). What set’s Khanna and Palepu’s analysis apart is their development of a practical toolkit that can assist firms to firstly identify the institutional void and then respond to them. Practical questions include the following:
● Can companies easily obtain reliable data on customer tastes and purchase behaviours?
● Are there cultural barriers to market research?
● Do world-class market research firms operate in the country?
● How strong is the country’s education infrastructure, especially for management and technical training?
● Are there strong political groups that oppose the ruling party? ● Do elections take place regularly
The identification of the void is done through assessing the market institutions by conducting market research on the following: credibility enhancers (e.g. auditors, certification and accreditation agencies); information advisers (e.g. research firms, stock analysts, rating agencies, specialized publications); aggregators and distributors (e.g. mass retailers, logistics companies, venture capital firms, trading companies); transaction facilitators (e.g. executive search firms, online payment and auction companies, stock exchanges, brokerage houses, credit card issuers); adjudicators (e.g., courts and arbitrators); and regulators and policymakers. Firms can use these questions to identify the missing pieces of market infrastructure that might contain viable opportunities (Khanna & Palepu, 2012 p.g. 176).
The response to the institutional void is then assessed through the application of a number of strategic responses. Whilst Khanna and Palepu apply this to the US pharmaceutical MNE I have adopted elements of this as a basis for the qualitative research carried out for this paper, albeit from the perspective of the oil and gas sector in less mature markets. Firms will face a number of strategic choices about their position in various markets and growth options. Research on the growth trajectory of the firms suggests that there are typically three dominant growth strategies: generic expansion, mergers and acquisitions and/or networks and alliances (Peng, 2002). The choices to be made are a function of the management’s national cultures (Hofstede, 1980) and yet increasingly MNE leadership is increasingly global in nature. For instance it is increasingly likely that even a Dutch MNE will have non-Dutch management debating the firm strategic options available to span a void between the Netherlands and Africa. Hence Peng’s statement (Peng, 2002 p.g. 261) that research in developed countries where the “rules of the game are taken for granted has had a difficult time separating the institutional effect on firm strategy that is independent of economic and cultural effects” is apt.
Khanna and Palepu conclude their analysis with the following sound points that can guide a firm’s decision-making process:
● MNE should accept that they are unlikely to get things right the first time and be willing to experiment to fit their business models to emerging markets
● MNE should position themselves as ‘partners in progress’ by building business that advance market development
● MNE should balance ambition ambition with humility not only because they will be viewed with suspicion (a legacy of colonialism) but also because they might not have the requisite knowledge or capabilities to succeed.
E. Institutional hazards & MNE activity
Slangen and Beugelsdijk’s (2010) work on institutional hazards builds on the earlier concepts in this paper but adds additional complementary perspectives. They acknowledge that MNE’s with international operations are confronted by informal and formal institutional hazards. The form of these hazards in host countries is a function of the cultural distance between the home and host country (Dikova, Rao Sahib & van Witteloostuijn, 2010). Similarly to other authors they attribute informal cultural differences to the societal, relational, and religious context. The formal hazards are related to the quality of a country's governance system (Dikova & van Witteloostuijn, 2007) and defined as the “public institutions and policies created by governments as a framework for economic, legal and social relations” (Globerman & Shapiro, 2003 p.g. 2015). The implication being that the lower the quality of this system, the higher the level of political instability and corruption (Slangen and Beugelsdijk’s, 2010 p.g. 981). Slangen and Beugelsdijk make important observations that are relevant to the case question. They consider that the negative consequences of institutional hazards are likely to differ across different types of horizontal and vertical value creating activities. Horizontal activity is referred to as market-seeking activities performed by standalone affiliates that manufacture good and services for the local market. Vertical activities are
performed by subsidiaries that extract or process natural resources and which sell their outputs to third parties, affiliated otherwise, for final sale. In this case they exploit the inter-country differences of factor endowments such as natural resources and labour (Dunning, 1993).
These horizontal and vertical differences are affected in different ways by the informal cultural and formal governance hazards. For instance firms with horizontal operations seeking to exploit local markets are more likely to be affected by governance hazards, such as nationalisations were key managers are replaced by less experienced but government officials. Cultural hazards also appear in the relationships between local and expatriate managers. The extent to which firms can mitigate against such hazards depends on their nature. Slangen and Beugelsdijk added an additional dimension to these hazards by considering if they are exogenous, and therefore cannot be effectively mitigated or endogenous, and can be partly or fully mitigated. The focus on the corporate strategic response to the tools, I believe needs to be a key part of a conceptual framework. A solid body of academic research and literature focuses on the identification of the various forms of institutional difference from a diagnostic perspective. I believe that developing recommendations for how firms can strategically respond to the institutional hazards is a logical addition to the important research on institutional voids and the case question for this paper.
F. Mental models on emerging markets
The final component of my conceptual framework focusses on the strategic choices available to firms engaged in emerging markets. With the accepted shift to emerging markets from an efficiency, natural resource and market seeking perspective “companies must cultivate executives and managers skilled in overcoming challenges to reach new markets” (Dhanaraj and Khanna, 2011 p.g. 684). Dhanaraj and Khanna contribute to shifting the mental models around emerging markets in order for MNE’s to develop a more nuanced understanding of the risks and opportunities in non-Western markets. They also target their analysis to all groups of learners who attend business
school: undergraduates; prospective executives of the future; MBA students and working professional and senior managers. Their ultimate objective is to challenge the mental models “the deeply held internal images of how the works works, images that limit us to familiar ways of thinking and acting” adding that often, “we are not consciously aware of our mental models or the effects they have on our behaviour” (Senge, 1991). The desired outcome occurs when the dynamics of emerging markets are not only understood at an intellectual level, but also when managers are equipped with the tools to take the desired actions (Johnson, Lenartkowicz & Apud, 2006 & Mintzberg, 2002).
In order to transform mental models Dhanaraj and Khanna (2011) have developed a five-point toolset critical to creating such a shift:
1. Changing mental models when learning is based on sound and compelling theoretical structure is more likely to result in a successful outcome because it creates a scientific base to organize learning.
2. The inclusion of diverse contexts helps the process of unpacking previously unchallenged stereotypes. This is particularly useful in challenging the idea that evolution from restrictive strategic planning to scenario planning cannot occur. The fact that scenario planning is based on considering plausible alternatives is a useful method of managing institutional differences.
3. The traditional focus on short-term financial outcomes and shareholder returns as the singular performance must be challenged in emerging markets. Consideration of diverse outcomes, such as the wider impact on civil society and its related effect on better functioning institutions in society is a key consideration (Margolis & Walsh, 2003).
4. Adoption of a multimethod learning that brings the reality of the emerging markets into corporate decision-making. Arguably the advances in social media and other distance shortening’ method of communication are increasingly a strategic tool in the task of shifting mental models. This would assist in
transforming mindsets and deflecting the impulse to extrapolate familiar context onto emerging markets.
5. Building on experiential learning opportunities whereby firms adopt a strategic human resource management decision to expose management to third parties firms that have the proven experience in operating in emerging markets. Overcoming these mental models involves immersing staff in the conduct of business planning and feasibility with minimal oversight from senior management in order to deepen the learning potential of such activities (Pless, Maak & Stahl, 2011). This learning by doing mindset eases the transition from problem-oriented pessimism to opportunity-oriented optimism (Dhanaraj and Khanna, 2011, p.g. 698.)
III. Case Description: NABC
A. Organisational Overview
NABC has its origins in the Africa Institute that was established in Leiden in 1946 by K.P. van der Mandele. In the post second world war period the goal of the African Institute was to establish new economic relations with the soon-to-be independent African nations. Whilst many of these nations had pre-colonial trade links with the Netherlands none gained formal independence from it. The business section of the African Institute ultimately became the modern day NABC, representing and serving the interests of Dutch companies that operate or have commercial links with Africa.
Vision and Mission
Today the NABC has more than 400 members, most of them for-profit organizations, and has strong links with knowledge institutions and a large number of sectoral and non-governmental organizations (NGOs) in the Netherlands. From a competitive standpoint the NABC has only one prominent competitor in the Netherlands-Africa trade and business promotion space. The Southern African-Netherlands Chamber of Commerce (SANEC) describes itself as the ‘the key intermediary agency to do business in and between the Netherlands, South Africa, the Benelux and the Southern African Development Community (SADC). However the overlap between the two is limited and the NABC’s strategic value-proposition is derived from its pan-African focus.
The NABC members range from large multinationals to small and medium sized companies in various sectors. Its extensive network of 5,000 African business contacts has helped in increasing bilateral trade and investment between Africa and the Netherlands. Between 2002-2009 total FDI from the Netherlands into SSA increased from around €5.0bn to €8.6bn. This figure excludes the investments of foreign-owned financial institutions based in the Netherlands. In absolute terms, Dutch firms are among the most important investors in SSA. In 2011, Dutch FDI amounted to approximately
one-third of the investments made by the United States, and half of those by the United Kingdom and France. The NABC’s strategic objectives are premised on positioning Dutch companies to seize opportunities in Africa and it recognizes that they are impacted by five factors (Lem, van Tulder & Geleynse, 2013):
● The weakening of Europe’s trade position with Africa ● Changing rules of the game as new competitors emerge
● Africa’s ‘apparently’ negative public image creates relative passiveness ● The diplomatic framework only partly supports private sector investment
● The difficulty in obtaining resources to finance exports and investments is making firms risk-averse and short-term oriented
The NABC brands itself as ‘knowing Africa’ and has built an established relationship with not only the largest Dutch corporate players but also the Dutch government. Its strategic relationship with the Ministry of Foreign Affairs and the Ministry of Trade and Economic Cooperation has lent it credibility in positioning its members with local stakeholders in Africa, particularly government institutions that are playing a more active role in domestic investment and commercial projects. The NABC has played a key role in supporting the Dutch government's transition from an aid-based bilateral agenda to a commerce and trade-based development focus. The Dutch government has recognised this need, given the changes to the competitive landscape as well the public expectations for greater public sector efficiency and effectiveness. Under its ‘economic diplomacy’ agenda it is increasingly partnering with other business and civil society organisation like the NABC that bring proven core competencies in engaging with the private sector. The van Leeuwen report notes that ‘economic diplomacy’ should be broader than just “commercial diplomacy or promotion of exports or trade. It should be a more comprehensive promotion of Dutch economic interests in any case including ‘Holland branding’ and access to raw materials, highly skilled labour and international public goods” (van Leeuwen, 2014 p.g. 9).
B. NABC Strategic Programmes
The NABC’s long-established knowledge not only of Africa, but of the specific institutional differences Dutch companies will face when crossing these boundaries, as well as African stakeholders doing business in the Netherlands, are some of the core benefits that NABC should provide to its members. To that end the NABC offers a number of services including inward and outbound sector-specific trade missions, ad-hoc business facilitating events and strategic programmes. Whilst the missions and events are key platforms I believe that it is at the strategic programme level that the institutional distances facing it members are most evident. Its six strategic programmes in different industrial sectors consist of Dutch companies, knowledge institutes and the Dutch government. The aim of these programmes (Table II) is to strategically position key sectors in African markets by strengthening local supply chains, businesses and infrastructure. Some of them focus on facilitating commercial export and import opportunities supported by appropriate trade financing tools, others on ‘pre-commercial’ strategic positioning and other on capacity-building and knowledge transfer. Funding methods also differ across the different platforms with some being funded as part of trade facilitation programmes supported by specific Ministries e.g. Port Development Programme (PDP) and supported by the Ministry of Foreign Affairs and other self-financed by members such as the oil and gas RT.
Table II NABC Strategic Programmes Programme Description
Oil and Gas Roundtable (RT) Partnership amongst the key Dutch oil and gas firms offering the full value chain of services globally and in Africa. Members are Shell, Fugro, Boskalis, Heerema, Van Oord, Damen, Dockwise, Smit Lamnalco, Jumbo Shipping & Royal IHC, Netherlands Ministry of Foreign Affairs & Ministry of Trade and Economic Cooperation.
Port Development Partnership (PDP) The PDP is focussed on the sustainable development of Africa’s main ports, optimizing the economic, environmental and public benefits of key components of the infrastructure.
Netherlands-Algeria Water Partnership This initiative brings Dutch water management expertise to the Algerian market in a public partnership that is financially supported by the Dutch government.
Dutch Dairy Development Partnership
Holland-Africa Poultry Partners (HAPP) HAPP is a partnership of companies, NGOs and knowledge institutes from the Netherlands specialized in solutions and knowledge transfer for the African poultry sector.
GhanaVeg Partnership NABC and the Wageningen University, Centre for Development Innovation, closely work together in order to connect Dutch businesses with the Ghanaian vegetable sector.
C. NABC Oil and Gas Roundtable
The RT was established in 2012 as a joint initiative of the NABC and 11 of the largest oil and gas firms in the Netherlands. The Netherlands has unrivalled expertise in the oil and gas value chain consisting of the upstream (exploration), midstream (transportation) and downstream (refining, product sales) segments. Acknowledging the ‘strength in numbers’ associated with membership of a joint industry platform the corporate members jointly fund the work programme activities on an annual basis, in addition to their annual membership of the NABC. RT has made a strategic decision to focus on the growing oil and gas sector in East Africa. The recent discoveries of large hydrocarbon deposits in Mozambique, Tanzania and Kenya offers enormous opportunities, from port development to LNG production, for the Dutch maritime and offshore industry (Wood Mackenzie, 2012).
At the programme level the RT has focused its activities on three distinct but also completely areas:
1. Building and deepening relations with government, state firms and the local private sector to create goodwill and positioning (Business to Government B2G & Business to Business B2B)
2. Knowledge-sharing programs with local tertiary and vocational institutions in partnership with Dutch-based centres of oil and gas excellence
3. Joint lobbying and strategic cooperation with African Governments
To date the RT has accomplished notable successes including the facilitation of numerous high-level trade missions visits by Dutch govt officials (Minister for Trade and
Development Cooperation Ploumen) and vice versa, established cooperation channels with business associations and civil society stakeholders across East Africa It has also facilitated numerous capacity-building workshops aimed at building technical and vocational skills (e.g partnerships between Maastricht University, TU Delft and the Eduardo Mondlane Maputo University). Individual members have used this to their own advantage in terms of their in-country strategy and business plan delivery. However it was agreed upon at the outset that the RT would not be used specifically for commercial or competitive business development. Decision-making at the RT is on a consensus-basis with a formal Steering Committee that includes representatives of the Ministry of Foreign Affairs and Trade & Cooperation. An important distinction is that the RT views itself as having a contractual relationship with the NABC, wherein the NABC provides services to the RT by way of its network in Africa, its relationship with the various Dutch governmental and civil society organisations and its ability to organise various business events and trade missions in Africa. Should the RT feel that it is not getting ‘value for money’ from its relationship with the NABC it is free to terminate its agreement and seek other alternatives. This is an important distinction in the relationship between NABC and its RT members. It compels the NABC to ensure that it is providing the intended services to its members or, if not, face losing legitimacy and credibility.
The corporate members of the RT possess specialised and niche capabilities. Whilst many have been active in mature African markets the undoubted resource potential in East Africa, the relative lack of governmental institutional capability and ever increasing public expectation for benefit raises the stakes considerably. The considerable body of literature on the negative effects of resource curse on fragile African institutions is well known and provides a dose of reality to the exploitation of natural resource in emerging markets (Costa & Dos Santos, 2013). Whilst many of these firms operate according to international best practice such as the IFC Performance Standards on social and environmental sustainability and have internal governance standards around anti-bribery & corruption and ethical behaviour the fact remains that institutional voids
persist. As a result firms are constantly challenged to improve on their corporate knowledge of the ‘rules of the game’.
D. Research Methodology
NABC has indicated that its key objectives are around:
● Positioning its strategic programme to deliver value to its members
● Assisting its members in navigating the institutional voids/business environment in Africa
In order to answer the main objectives above I developed a survey questionnaire (Figure 4) to guide the qualitative research. There were two components to the questionnaire: firstly investigating the firm's experience of building business opportunities in Africa, with specific questions around entry positioning and options, operational and market exit issues, corruption and governance risk. Secondly their opinion of how the “Dutch BV’ platform is perceived in Africa.
Figure 4 Survey Questionnaire
Secondly I focussed on their views of the effectiveness of the NABC in its role as facilitator of the activities of the RT. With a slightly modified
questionnaire template I also
engaged with the Ministry of Foreign Affairs. Meetings took place between July and August 2015 with senior management of the RT companies over an average period of 1hr and 30 minutes, usually at the company HQ
throughout the Netherlands. Typically respondents had upwards of 15 years oil and gas experience, both globally and in Africa, with bottom-line business development and/or functional responsibility. Ministry meetings were held in The Hague. I assured all interviewees that the information collected is for my MBA research only and would not be directly attributed to either the individual, company or Ministry represented. All participants (Table III) were given the opportunity to review and, if necessary, amend the record of the meeting to ensure accuracy. I tried as much to possible to conduct the interview in an informal manner and this ensured comprehensive feedback in all sessions.
Table III Interview List
Interviewee Company Location
Senior Commercial Advisor Shell International E&P The Hague (Netherlands) VP Strategic Business
Development
Van Oord BV Gorinchem (Netherlands)
Senior Policy Officer Ministry of Foreign Affairs The Hague (Netherlands) Business Development Manager
(Africa)
Fugro BV Leidschendam (Netherlands)
Business Development Manager (Southern Africa)
Heerema Marine Contractors Leiden (Netherlands)
Business Development Manager (Global)
Heerema Marine Contractors Leiden (Netherlands)
Regional Commercial Manager Smit Lamnalco Rotterdam (Netherlands) Regional Director Africa Damen Gorinchem (Netherlands) Area Manager Africa Boskalis Offshore Papendrecht (Netherlands)
In addition to these interviews meetings were held with NABC personnel to build my institutional knowledge of the organisations and its relationships with its members. My choice of qualitative interviews is borne out of the assumption that the intangible nature of institutions and networks are better investigated via conversation with respondents. This allows the response to be extensive and allows for previously unconsidered
perspectives of the subject matter to emerge. Hence there is space for spontaneous questions to arise and also for the interviewer to improve and refine their interview technique.
E. Case Question
The members of the RT have indicated that their overriding objective is to use the platform provided by the NABC to position themselves with local stakeholders, governments, businesses and civil society. This ‘pre-commercial positioning’ assists the RT in showcasing the full value chain of services domiciled within the Netherlands.
This objective is a strategic response to the increasingly competitive business landscape in Africa. Rosenberg (2015) notes “sub-Saharan Africa is already a competitive market place. Asian companies dominate many sectors, while African companies are expanding their footprint and market-leading Western multinationals are also prominent. All are vying for a share of the continent’s growing consumer class and government spending”. The companies are clear, however, that under the governance rules of the RT competitive commercial business development is prohibited.
Many of the RT members have in-depth experience of building business opportunities in Africa and turning the institutional voids that exist between the Netherlands and Africa into viable businesses. I want to use the experience of the RT in spanning these voids to develop practical recommendations for the NABC and others that can be used, in a strategic manner, to enable it to better position its entire membership in Africa.
Case Question
● What has been the experience of the RT members in spanning the institutional void in Africa? How can this experience be used by intermediary organisations such as the NABC in supporting existing and potential new members in Africa and beyond?
IV. Analysis and Discussion
The interviews conducted with the RT provided a rich body of evidence to apply to the theoretical framework in Section II of this paper. I acknowledge that the oil and gas sector is niche and highly capital intensive, and that its fortunes are dictated by the global economic forces of supply, demand and the related appetite for natural commodities. Despite the pre-commercial positioning element of the RT, its members, many being naturally resource seeking, are more likely to have a deeper experience of managing the differences between the home and host environment of their respective MNE. Nevertheless the institutional distance prevails and, in the African context at least, serves as a good estimate for the level of uncertainty that the RT firms continue to face in the host, African, environment.
I also acknowledge that basing my research solely on personal in-depth interviews might lead to the problem of generalization. Naturally this implies that the findings may not be representative for MNE’s in general and should be analysed with that proviso. It is true that case question is framed towards the experience of the RT members and is aimed at highlighting the areas where organisations like the NABC and others can assist their members in spanning the institutional void or business context. I believe that the personal views of the members, when applied to the theoretical framework in Section II provides useful recommendations at the organisation level for NABC and other potential network organisations. I have structured the flow of my analysis in the same sequence as the analytical framework in Section II.
A. Institutions
North and Williamson’s foundational work provides a useful theoretical framework to explicitly define institutions and monitor how they evolve over time.
North unpacks both formal and informal institutions and details how the exchange between parties is impacted by asymmetries in information, uncertainty regulatory
environments and market information. With growing trade distance market failures lead to transaction costs. Many of the respondents acknowledge these costs in Africa but also indicate that they are not fundamentally different to the type of failures that face them in conducting business in other parts of the world. The respondents highlighted that the establishment and incorporation of local subsidiaries as a key means of reducing the uncertainty in legal and regulatory frameworks and are an important part of the strategic-decision making process in their firms. However the nature of the contractual arrangements between the firm and its contracting client will determine the extent to which these transaction costs are mitigated:
“My firm’s entry or positioning strategy has been mainly to follow the lead of its JV global partner or contracting party - we are usually never the lead contractor and this minimizes the impact of a weaker regulatory set-up and also minimizes the cost of additional country due diligence and stakeholder-mapping” (Respondent - Firm A)
The statement above can be contrasted with another respondent:
“Being a privately held firm has implications for how we build opportunities. We always complete pre-tender due diligence and ensure that we operate within our own internal business principles although being a family we are not always open to external JV influence and this can be a challenge for local partnerships and intelligence.” (Respondent - Firm B)
The views above suggest that these firms are precisely aware of the transaction costs and information asymmetries related to doing business in Africa and adopt deliberate strategic options to mitigate business environment risks as well to retain management control and oversight. By adopting a ‘below the radar approach’ Firm A, as a result of commercial exigencies, essentially devolves the burden of correcting what it describes as ‘critical market failures’ to its clients (Khanna and Palepu, 2012). Firm B’s response indicates that it invests time and resources into minimising the extent to which any potential partners can influence its interaction with local institutions. The negative
consequence of this might be a deterioration in the relationship with local government (B2G) networks but also with local business (B2B) and broader civil society. The respondent in Firm B acknowledges that local B2B partnerships were useful for his firm to bridge the regulatory gap and fill institutional voids but also acknowledged the tension inherent in ceding power and control to host country stakeholders whilst retaining home country controls. Yet this is an important element of foreign MNE business engagement strategy.
Williamson’s framework of social analysis and its focus on the evolution of institutions suggests that the majority of the work done by business intermediary organisations exist at Levels 2-4 (See Figure 2). Level 2 is based on the emergence of the instruments of modern government that establishes the rules of the game. In the African context it is acknowledged by almost all respondents that successful engagement with government agencies is the largest determinant of business success. And yet doing so represents possibly the largest hurdle for firms with well-established businesses in Africa. Additionally Level 3 focuses on the quality of these institutions and my research suggests that this is the space in which the efforts of the NABC can be most effectively deployed. Doing this requires effective support from the home government in supporting the efforts of the businesses to engage with national and local governments: “There has been a shift in the contractor, local government and IOC (client) relationship. Local govt. and publicly owned companies are now less passive in seeking the 'best deal' whilst the traditional international oil company influence has reduced. A new business engagement model has emerged with sub-contractors increasingly engaging directly with government and requiring the active support of the Dutch government to position us.” (Respondent - Firm C)
Firms recognise that in addition to understanding the country investment and policy framework they must have a detailed understanding of the power relationships that bind Level 2 institutions together. Others recognise the need to build ‘on-ground’ business intelligence from multiple sources:
“To span the institutional void my firm will typically partner with general, tax, business advisors to build knowledge of how to navigate the local market. We have had to build a culture of learning in order to prevent the repetition of past mistakes where we mismanaged our relationships with local partners.” (Respondent - Firm C)
Level 3 and 4 focuses on the quality of institutions and the incentives that ensure that ensure that economic exchange is supported by rational utility/profit maximizing motivations. From a temporal perspective this occurs over a 10 year to continuous period and this, in my opinion, is where the majority of NABC efforts are targeted. However in order to explore and situate this within my research it logical to analyse these Level 3 and 4 institutions from the perspective of Berry, Guillen and Zhou’s approach to cross-national distance.
B. Cross-national distance
Berry, Guillen and Zhou’s work on cross national distance points to the types of differences that exist between host and home countries. The nine dimensions they identify are a template against which firms can base their entry mode decision as they seek to reduce their liability of foreignness. This raises the question of the role that NABC can play in providing its members a more holistic understanding of how they can mitigate the various dimension of distance, whilst also recognising the inherent capabilities that its members can deploy (Table IV).
Table IV Dimensions of cross-national distance
Dimension Definition Analysis
Economic Differences in economic
development and macro economy
Respondents acknowledged the difference in stages of economic development between the Netherlands and Africa and particularly the impact that oil and gas developments can make at the macro and micro levels. Mitigating resource curse / Dutch disease type effects has led to a dialogue between the firm and host government in understanding how the schedule/phasing of the development of a large scale offshore gas discovery can be better managed for the local economy.
Financial Differences in financial sector development
Most respondents acknowledge that the relative strength of their balance sheets shields them from having to access local financial markets to fund OPEX and CAPEX expenditure. Many of their local partners have challenges in securing debt and in a particular case, when a Dutch based firm wanted to acquire a local partner (as required by local content laws), the differences in valuation of the local firms assets and liabilities meant that this institutional financial void could not be overcome.
Political Difference in political stability, democracy, and trade bloc membership
All respondents agreed that a stable political regime enhanced their ability to do business. However the natural resource base was the key determinant of country entry decisions and the implementation of appropriate risk mitigation, political environment screening and consultation with the Dutch Ministry of Foreign Affairs/Diplomatic community allowed firms to operate in countries with varying levels of political stability e.g. Nigeria, Egypt, Equatorial Guinea, Angola, Mauritius, Mozambique, Libya, Algeria, Sierra Leone etc.
Administrative Difference in colonial ties, language, religion and legal system
The majority of African countries had the UK, France or Portugal as colonisers and not the Dutch. Yet one respondent noted that the Dutch’s long-standing 16-17th century trade links with Africa had effectively mitigated some of the more obvious administrative differences between individual countries and the Netherlands.
Cultural Differences in attitude toward authority, trust, individuality, and importance of work and family
Many respondents explained the need to develop partnerships based on mutual benefit, trust and respect. However almost all respondents agreed that the famous Dutch directness was equally a benefit and hindrance to business engagement depending on the level of foreign exposure of the host country stakeholder. Others noted that in the past they underestimated the importance of cultural norms related to employing local staff and the effect this would have on their family links and pressures to offer employments to tribal kin. In the worst case ethnic and tribal consideration impacted the effectiveness of senior expatriate management staff seconded to foreign subsidiaries.
Knowledge Differences in patent and scientific
production
Almost all respondent noted that the hi-tech and niche services they offered put them at an advantage when seeking business in Africa. However the increased capacity of local and public firms to compete to develop resources meant that they could more easily contract with and partner global 3rd party service providers to develop national resources. This reduced the knowledge distance significantly and points to the increase in power and influence wielded by African companies.
Geographic Great circle distance between geographic center of countries
Being natural resource seeking the spatial geographic distance was less of a barrier to the respondents.
Cross-national distance is a generic framework to articulate the ways in which a country can be connected with the outside world. These differences are as easily applicable to Africa as they are to Asia and the Middle East. Certainly these differences have affected Dutch firms in the entry and operational decisions in Africa but the key point is that they have not hindered them to the point of a market exit. From a strategic management perspective many firms appear to experience these differences in heterogeneous ways and this fact presents the NABC with options that it can implement as a strategic offering to its members. I will outline these in the recommendation section.
C. Institutional hazards & MNE activity
Both Khanna and Palepu (2012) and Slangen and Buegelsdijk (2010) provide depth and specificity to institutional voids by focussing on emerging markets and also on the nature of MNE value creating activities. Khanna and Palepu advocate a key role for specialized intermediaries that assist buyers and sellers to transact more efficiently. They must also help firms to identify the type of voids they are facing and the strategic responses that are most appropriate. These responses, in the case of the NABC oil and gas RT members, affect their markets entry and growth options decisions. The firms interviewed would benefit from applying Khanna and Palepu’s toolkit. This assessment of market institutions can be used to identify elements of the market structures that can contain viable business opportunities. For instance almost all respondents, as a response to local regulations requiring local participation, entered into self-financed JV partnerships with local entities. I would argue however that these JVs, although funded and controlled by the Dutch MNE, often represent a missed opportunity to effectively neutralise the impacts of institutional voids. This learning can then be applied, and appropriately adapted to other countries and markets in Africa. The following examples illustrate this point:
“My firm will execute the contract via one of its BUs, subsidiaries or via JV with a local representative partner but only after scrutiny and due diligence is completed which makes teaming up for a short project (1m, 6months or 1 year unlikely).” (Respondent - Firm D)
and:
“We implement in-house due diligence to inform entry and country positioning strategy. We are keen to partner with credible local players, particularly in the pre-commercial feasibility stage (2 - 5 years) to learn as much about the country business environment. Partnership is the preferred option and we also consider carrying (funding) the local
