Master’s Thesis - Business Administration: International Business A Case Study on the Effect of Institutional Voids and Ownership
Structures on the Influence Tactics used by Local Communities Situated near Mining Enterprises
Date: 25th of June, 2021
Thesis supervisor: dr. Westermann-Behaylo Student: Annika Hooft, 11224312
Course: Master Thesis, 6314M0502Y
1 Statement of originality
This document is written by Annika Hooft who declares to take full responsibility for the
contents of this document. I declare that the text and the work presented in this document are
original and that no sources other than those mentioned in the text and its references have
been used in creating it. The Faculty of Economics and Business is responsible solely for the
supervision of completion of the work, not for the contents.
The importance of the community as a stakeholder has become more apparent in business.
This research focuses on communities situated near mining sites in Sub-Saharan Africa. The objective of this thesis is to gain insights into whether the institutional environment impacts the influence tactics used by the local community. Moreover, it is considered if different ownership structures, state-owned or private-owned, result in different influence tactics used by the community. Six working propositions are constructed based on the literature. To verify these, a multiple, qualitative case study is conducted. The findings do not support the working propositions and different final propositions are derived. The findings do suggest that a weaker institutional environment results in the use of different influence tactics than those used in a stronger institutional environment. Additionally, the findings suggest that
communities located near state-owned enterprises (SOEs) are more likely to use violent influence tactics than those situated near private-owned enterprises (POEs). Opposing existing literature, the findings suggest that POEs are more likely to initiate developmental projects than SOEs. Finally, by using the community perspective, the findings show that the
statements about developmental projects provided by companies in sustainability reports or websites are often not supported by statements provided by the community themselves. This emphasizes the importance of including the community perspective in academic research on community interaction and developmental projects.
Keywords: institutional void, stakeholder, influence tactics, influence strategies, private-
owned enterprises, state-owned enterprise
1. Introduction ……… 6
2. Literature review ……….. 9
2.1. Institutional voids ……….. 9
2.1.1 Institutional voids ……… 9
2.1.2 Relevant institutional voids from a mining community perspective ………... 11
2.2. Influence tactics ………. 14
2.2.1 Community as a stakeholder ………. ...14
2.2.2 Stakeholder influence strategies ……….. 16
2.2.3 Influence tactics from the local community ……… 17
2.3 The relationship between institutional voids and influence tactics from the local community ……… 21
2.4 The nature of the mining enterprise; ownership structure ……….. 23
2.4.1 State-owned enterprises ………... 23
2.4.2 Private-owned enterprises ……… 25
2.5 Influence of the nature of the firm on the relationship between institutional voids and influence tactics from the local community ………. 27
2.5.1 Influence of the nature of the firm: state-owned ………..27
2.5.2 Influence of the nature of the firm: private-owned ……….. 28
3. Research Design and Methodology ………. 30
3.1 Research design ……….. 30
3.2 Case Study ……….. 31
3.2.1 Case study selection ………. 31
3.2.2 Case study data collection ……….. 35
3.2.3 Case study data analysis ……….. 38
3.3 Credibility, Trustworthiness and Authenticity ………... 39
4. Case Analysis and Findings ………. 41
4.1 The presence of Institutional voids ……… 41
4.1.1 Level of the educational system - Education Index ………. 41
4.1.2 Level of infrastructural development -Africa Infrastructure Development Index ...42
4.1.3 Level of regulatory mechanisms and financial instability in the capital market - Global Ease of Doing Business Score ……….. 43
4.1.4 Institutional voids per country……….. 44
4.2 Influence tactics used by the local community ……….. 46
4.2.1. Direct content analysis and emergent coding ………. 46
4.3 Within Case Analysis ………. 50
4.3.1 The Sefikile Community ………..50
4.3.2 The Ga-Mampa Community ……… 51
4.3.3 The Kansanshi Commmunity ……….. 53
4.3.4 The Chiadzwa Community ……….. 55
4.3.5 The Sakania Community ………. 57
4.3.6 The Ruashi Community ………... 59
4.3.7 The Moatize Community ………. 61
4.3.8 The Cuango Community ………..64
4.4 Cross Case Analysis and Findings ………. 64
4.4.1 Comparative analysis of different institutional void levels ………. 64
4.4.2 Comparative case analysis different ownership structures ……….. 66
5. Conclusion and Discussion ……….. 70
5.1 Final propositions derived from findings ………... 70
5.2 Theoretical and practical contributions of the case study ……….. 73
5.3 Limitations of the case study ……….. 74
Academic Reference List ………. 76
Appendices ……….. 83
Appendix A: Influence Tactics Community Monitors’ Database ……… 83
Appendix B: Influence Tactics Community Monitors’ Database & Additional Documents ………...85
Appendix C1: Sefikile Community Monitors ……….. 87
Appendix C2: Sefikile Newspaper articles ……….. 89
Appendix C3: Sefikile Additional documents ………..90
Appendix D1: Ga-Mampa Community Monitors ……… 91
Appendix D2: Ga-Mampa Newspaper Articles ………... 94
Appendix D3: Ga-Mampa Additional Documents ………... 95
Appendix E2: Kansanshi Newspaper articles ……… 100
Appendix E3: Kansanshi Additional Documents ………... 101
Appendix F1: Chiadzwa Community Monitors ………. 104
Appendix F2: Chiadzwa Newspaper Articles ……… 114
Appendix F3: Chiadzwa Additional Documents ………117
Appendix G1: Sakania Community Monitors ……… 119
Appendix G2: Sakania Newspaper articles ……… 122
Appendix G3: Sakania Additional documents ………... 122
Appendix H1: Ruashi Community Monitors ………. 124
Appendix H2: Ruashi Newspaper Articles ……… 127
Appendix H3: Ruashi Additional Documents ……… 128
Appendix I1: Moatize Community Monitors ………. 129
Appendix I2: Moatize Newspaper Articles ……… 136
Appendix I3: Moatize Additional Documents ………... 138
Appendix J1: Cuango Community Monitors ………. 141
Appendix J2: Cuango Newspaper articles ………..141
Appendix K1: References Community Monitors database ……… 142
Appendix K2: References Newspaper articles ………... 166
Appendix K3: References Additional Documents ………. 172
List of Tables Table 1: Typololoy of influence strategies ... 19
Table 2: Communities selected as case studies ... 35
Table 3: Measures for Institutional Voids ... 36
Table 4: Overview preliminary codes: potential influence tactics used by the local community ... 39
Table 5: Assigned values Education Index ... 42
Table 6: Assigned values African Infrastructure Development Index ... 43
Table 7: Assigned values Global Ease of Doing Business ... 44
Table 8: Overview of case selection based on level of institutional void and ownership structure ... 45
Table 9: Overview codes for influence tactics used by the local community ... 49
Table 10: Final propositions ... 73
List of Figures Figure 1: Data structure: codes for influence tactics ... 18
Figure 2: Specific influence strategies within Frooman (1999) typology ... 20
Figure 3: Mining sites and processing facilities featured in this report ... 58
Figure 4: Aerial shots Ruashi Mine ... 60
“Yesterday the ZCDC representatives met with the headman Chiadzwa’s community at his homestead to discuss their grievances to the mining company. This came after some two days ago villagers from Tonhorai and other surrounding villages demonstrated and blocked the buses which carries workers from the mine. The communities accused the mining company of failing to employ people from the local but instead employing non local people in the mine and demanded the company for explanation.” (Sithole, 2018, ZCDC meet Headman of Chiadzwa). This quote, originating from an article from the Community Monitors’ database, shows several ways how the local community of Chiadzwa in Zimbabwe tries to
communicate with the Zimbabwe Consolidated Diamond Company (ZCDC). In order to establish a meeting, the community demonstrates and blockades the roads, which makes you wonder why they use these techniques to reach the mining enterprise. Do they need to use these strategies and tactics in order to reach the company?
Mining enterprises often conduct their business in emerging market economies (EMEs) (Khanna, & Palepu, 1997). These EMEs are often characterized by poverty, weak institutions and political instability (Kolk, & Lenfant, 2015). The increased focus on the impact mining enterprises have on the social and political environment, forces these
enterprises to pay attention to the demands of external stakeholders. The interaction between the local community and mining enterprises in EMEs depends partly on the influence tactics used by the local community (Kolk, & Lenfant, 2015).
This research focuses on local communities and the relationship between the influence
tactics used by the local community and the presence of institutional voids. This presents an
interesting research gap because the research is conducted from the perspective of the local
community, instead of using the company perspective.
7 Stakeholder influence strategies have been discussed intensely in the International Business (IB) literature (Frooman, 1999; Hendry, 2005: King, 2008), nevertheless there remains a deficit in the IB literature on the relationship between institutional voids and the specific influence tactics used by local communities situated near extractive industries.
Despite earlier research on the effect institutional mechanisms have on the potential influence communities exert on enterprises, no specific research on this relationship has been conducted in Sub-Saharan Africa. Furthermore, prior research has been conducted on the relationship between firms and the local community, but the specific influence of institutional voids on this relationship remains unexamined (Kolk, & Lenfant, 2018; Dorobantu, & Odziemkowksa, 2017). Moreover, Arenas, Murphy and Jauregui (2020) specifically investigate influence tactics from communities situated near extractive industries and suggest as future research the relationship between the community influence capacity and the institutional environment.
In addition to analysing the relationship between institutional voids and influence
tactics in Sub-Saharan Africa, the nature of the ownership structures of the enterprise are
taken into consideration. Both state-owned and private-owned enterprises are present in the
extractive industries in Sub-Saharan Africa. There are many differences among the objectives
of state-owned enterprises (SOEs) and private-owned enterprises (POEs), especially with
regard to developmental objectives. Consequently, local communities often have different
expectations of the community interaction of SOEs and POEs. These differences in
expectations and objectives influence the effect institutional voids might have on the
influence tactics used by the local community and the level of engagement between an
enterprise and the community. To incorporate and investigate all these factors the following
research question is presented: In what way does the nature of the ownership structure of the
mining enterprise influence the relationship between institutional voids and the influence
tactics used by the local community?
8 This research uses a multiple, qualitative case study to answer the research question from which the findings have both practical and theoretical contributions. Firstly, the findings from the multiple, qualitative case study suggest that communities situated in a weaker institutional environment are more likely to use indirect resistance and withholding tactics, such as litigation and pressuring the firms through the media and more communication strategies, such as report production and protests. Moreover, the findings from this case study suggest that communities situated near SOEs engage more in violent influence tactics than communities near POEs. It is proposed that violent community interaction is more related to ownership structure than to institutional voids. Accordingly, it cannot be derived that more violence is related to a weaker institutional environment. Furthermore, this thesis contributes to the IB literature in the following manners. Currently, most of the IB literature states that SOEs are more likely to initiate developmental projects, whereas the findings from this case study oppose this statement. In addition to that, most research on community engagement and development is based on sustainability reports provided by companies. The case studies from this thesis show that the statements provided by companies are often not supported by
statements and reports from the community or NGOs. They perceive the effectiveness of developmental projects and community interaction often as insufficient. This insight suggests that when the effectiveness of developmental projects and community interaction is analysed, the community perspective should also be included.
This thesis has the following structure. In order to conduct an in-depth analysis, the different institutional voids, influence tactics and different ownership structures will be defined and explained. Based on the existing literature, working propositions are developed.
Afterwards a multiple, qualitative case study using document analysis, retrieved from the
Community Monitors database and additional documents, is conducted. Based on the findings
from this case study the final propositions are developed.
2. Literature review
To establish the relationship between institutional voids and influence strategies the two concepts are defined and explained based on the literature. Afterwards, the impact of institutional voids on the influence tactics will be determined and based on the literature working propositions are developed. Subsequently, the ownership structures are explained in a similar way. Therefore, working propositions on how the ownership structures might influence the relationship between institutional voids and influence tactics are developed.
2.1. Institutional voids
Firstly, a definition of institutional voids will be provided. After which the relevant institutional voids for mining communities in Sub-Saharan Africa will be identified.
2.1.1 Institutional voids
North (1990, p. 97) describes institutions as “the humanly devised constraints that structure political, economic and social interaction”. This definition includes the formal rules, like laws, institutions and property rights, and informal restrictions resulting from customs and traditions. One of the perceived effects and reasons for establishing institutions is to decrease the transaction costs of conducting business. Khanna and Palepu (1998) identify two main types of transaction costs for which developed economies have established institutions to mitigate these costs. Those are the information asymmetries that arise when two different parties do business and the risk of ineffective contract enforcement. Most developed economies have well-established institutions to overcome these problems, but EMEs often lack the presence of these institutions. In addition, when these institutions are present, they are often inadequate or incapable of addressing the issues these institutions try to mitigate. The absence of institutions is referred to as institutional voids (Khanna, &, Palepu, 1997).
To verify which specific institutional voids are relevant for the mining industries in
Sub-Saharan Africa the general institutional voids in EMEs are examined.
10 Khanna and Palepu (1997) were the first ones to define the concept of institutional voids.
They identified five areas in EMEs in which institutional voids occur. These are the
following: capital market, labour market, product market, government regulation and contract enforcement. Institutional voids in capital markets are primarily the result of information asymmetries between investors and enterprises. Developed economies have created laws, regulations and independent institutions to make sure that the information provided by enterprises is correct. In most EMEs these mechanisms are absent, which makes it more difficult for new firms to attract investors (Khanna, & Palepu, 1997).
Institutional voids in product markets relate to information asymmetries that occur between consumers and companies. Most consumers in EMEs cannot find supporting evidence to verify if the information about the products is correct. This is due to a lack of efficient law enforcement and government watchdog institutions.
The biggest problem for labour markets in EMEs is the absence of high-quality educational systems. Khanna and Palepu (1997) highlight that the absence of educational systems is one of the main areas in which multinationals can improve the situation for the local community. They can do this by providing the local community with internal training programs or initiate more extensive projects, like building schools.
The fourth institutional void identified by Khanna and Palepu (1997) is government
regulation in EMEs. Institutional voids related to government regulation refer to regulatory
bureaucracy and how important good relationships between the enterprise and the government
are. Government actions in EMEs are often unpredictable and, in some cases, the interaction
between business and government authorities involves corruption. Therefore, the role of the
government in conducting business and corporate decision-making is more substantial in
EMEs than in developed economies.
11 Lastly, contract enforcement, for example with property rights, poses a problem for business practices in EMEs. In developed economies contracts form a solid basis for
agreements and provide both parties with legal protection. In EMEs, agreements are often not made on a contractual basis, but rely on informal relations and reputation. This makes it more difficult for foreign enterprises to invest in EMEs (Khanna, & Palepu, 1997). In the next paragraph, the specific institutional voids in EMEs concerning communities living near mining industries are defined.
2.1.2 Relevant institutional voids from a mining community perspective
The five institutional voids identified by Khanna and Palepu (1997) are present in EMEs and subsequently also in Sub-Saharan Africa. Nevertheless, not all five are relevant to this research. In order to establish which institutional voids are relevant, articles specific to Sub- Saharan Africa, extractive industries and local communities near extractive industries were examined.
Luiz and Ruplal (2013) identify several specific institutional voids that are present in
Africa and the mining industry. Luiz and Ruplal (2013) mostly focus on institutional voids
that result in higher transaction costs for the mining enterprises in Africa. They establish that
especially governance issues and political instability result in higher transaction costs for
enterprises in Africa. A consequence of the weak government institutions in Africa is a lack
of infrastructural development compared to developed economies. Measures in which this can
be seen are weak infrastructure and market deficiencies (Murithi, Vershinina, & Rodgers,
2019). Issues related to infrastructure play a major role for mining companies, since most
infrastructure surrounding the mining site is not well developed. Infrastructure is therefore
one of the main institutional voids for which mining enterprises seek to improve and mitigate
the transaction costs of conducting business. For example, Newenham-Kahindi (2011)
concluded that Barrick, a mining corporation active in three different mining sites in
12 Tanzania, allocates at least half of its corporate social responsibility budget to infrastructure development. From this, it can be determined that infrastructure is a relevant institutional void for mining enterprises and communities in Sub-Saharan Africa
Even though infrastructural institutional voids impact the local communities, it is important to consider which institutional voids are relevant considering the community perspective. Based on a case study conducted in Mexico by Agostini, Bitencourt and Vieira (2020) several relevant institutional voids for local communities near multinationals are identified. In general, the institutional voids related to education, health system and economy were perceived as most impactful and noticeable. From this, it can be assumed that
educational systems are important for the institutional voids for the local community.
Moreover, they influence the labour market in the regions in which mining enterprises operate. This can result in conflict between the local community and the mining enterprise, which happened between the local community situated near a Barrick mining site in Tanzania.
The conflict was that high-paid, leadership and engineering positions in the firm were often filled with expatriates and not by people from the local community. This was mainly the result of inadequate education systems in Tanzania. Barrick tried to improve the situation by initiating internal training programs and developing the education system in villages near the mining site (Newenham-Kahindi, 2011). Based on the conflicts that happen as a result of inadequate education and the impact on the labour market education has, it can be deduced that institutional voids related to education are important for mining communities in Sub- Saharan Africa.
Besides institutional voids related to infrastructure and education, other institutional voids specifically relevant for Africa are related to property rights, ownership structures and financial instability (Luiz, & Ruplal, 2013). These issues are linked to the overarching
institutional voids of contract enforcement and capital market (Khanna, &, Palepu, 1997). The
13 institutional voids in the capital market are mainly caused due to a lack of regulatory
institutions, like legislation and monitoring agencies. According to Murithi et al. (2019), these regulatory institutional voids related to the capital market cause inefficiency and high
financial transaction costs.
Furthermore, the instability of the legal and governmental systems, especially policies and laws related to developmental projects and the lack of control mechanisms in the area, contribute to institutional voids present in the economy and capital market. As mentioned, the economy is one of the areas of institutional voids that the community considers important (Agostini et al., 2020). Moreover, Murithi et al. (2019) state that one of the main institutional voids present in Sub-Saharan Africa is the absence of regulatory mechanisms and how this weakens the capital market. Therefore, the level of regulatory mechanisms and financial instability in the capital market will be used as a measure for institutional voids.
Additionally, Adomako, Amankwah-Amoah, Dankhwah, Danso and Donbesuur (2019) state that especially EMEs in Africa must deal with the presence of much bigger institutional voids than in other regions. Adomako et al. (2019) focus their study on
institutional voids relevant for Ghana for which there are four measures of institutional voids,
retrieved from the research of Giachetti (2016). Giachetti (2016) identified a list of measures
of institutional voids to determine the level of institutional voids present in China. Adomako
et al. (2019) acknowledge that the measures from Giachetti (2016) are not directly applicable
to Ghana. The measures Adomako et al. (2019) consider to be relevant for Ghana are the
following: the level of development of the educational infrastructure and to what degree
further intensive training is required for employees, lack of infrastructure, ambiguous
bureaucratic and legal institutions and the ability to find adequate and reliable information
about customer preferences. From these four measures, the institutional voids related to
education, infrastructure and the bureaucratic and legal institutions are relevant to this
14 research. These three measures are mentioned by prior articles which refer to institutional voids relevant for Africa, the mining industry and institutional voids from a community perspective. The ability to find adequate and reliable information about customer preferences is not relevant to this research since most mining enterprises do not sell their product directly to local customers. Therefore, the last measure is not relevant for this research (Agostini, et al., 2020). Consequently, the following three measures will be used to determine the level of institutional voids. The first is the level of the educational system, the second is the level of infrastructural development and the last measure is the level of regulatory mechanisms and the financial instability in the capital market. In the following section the influence tactics used by local communities are identified.
2.2. Influence tactics
To distinguishes the influence tactics used by the local community stakeholder theory is introduced with the focus on the community as a stakeholder. Afterwards general influence tactics from stakeholders are defined, from which the specific influence tactics used by the communities are identified.
2.2.1 Community as a stakeholder
The managerial view in which the sole objective of a company is to make a profit was especially supported by Friedman (1970), who considered that the main purpose of a
corporation was to pursue profits. Friedman (1970) even stated that corporations who did not solely pursue profits and focused on social responsibility were behaving unethically.
According to Friedman (1970), the main responsibility of the enterprise and its CEO is to act in the interest of shareholders, which primarily means to increase profits.
A counterview was proposed by Freeman (1984) who introduced stakeholder theory.
Stakeholder theory means that the responsibility of enterprises is to maximize value for all
stakeholders (Freeman, &, Elms, 2018). Stakeholder theory focuses on the social
15 responsibility and ethics of an enterprise. Within stakeholder theory, stakeholders are defined as: “any group or individual who can affect or is affected by the achievement of the
organisation’s objectives” (Freeman, 1984, p. 46). This can be customers, employees, shareholders, suppliers and communities. For the definition of community as a stakeholder, the community of place from Dunham, Freeman and Liedtka (2006) is used. The community of place refers to the geographical location of its members. This definition is most applicable since this research focuses on specific communities near mining sites and how these
communities engage with the mining operations. Additionally, most company practices targeted to improve corporate community interaction are focused on communities that are geographically nearby. Besides the community of place, the community of interest is also partly applicable to this research. Communities of interest are defined as groups of people who share a common interest. In the context of stakeholder theory, these are often groups of people who try to raise awareness for a certain cause and target enterprises (Dunham et al., 2006). Within this conceptualization, organized groups of people working together to target the mining corporations are also considered to be communities. Therefore, the main focus and unit of analysis are the communities of place, but communities of interest are also taken into account.
The focus on the community as a stakeholder has especially become more relevant
since the role of the community has become more evident. The public pressure on mining
corporations to engage in proper community communication and interaction has grown over
the past decades. The importance of community communication for the success of the mine
has become a key point of business for managers of mining enterprises (Wang, Awuah-Offei,
Que, & Yang, 2016). Therefore, companies need to understand the influence tactics local
communities use. Contrarily, it is important for the local community to understand how the
institutional environment and ownership structure of the firm might shape their use of
16 influence tactics. These differences are especially relevant in communities where the business environment is less stable due to the presence of institutional voids. How these differences impact the influence tactics used by the community depends on several factors.
According to Wang, Huang, Hu, Cui and Li (2017) the perceptions of the total
community is the sum of the individual expectations from each member of the community. A mining enterprise can improve its community perceptions by investing in infrastructure, creating job opportunities and giving a higher income to mine workers. By contrast, the enterprise can negatively influence the community perceptions by contributing to
environmental pollution, especially of water sources, crime, traffic and bad labour conditions (Wang et al., 2017). Therefore, it can be deduced that community perceptions are influenced by institutional voids. How these community perceptions influence the type of influence tactics the communities use will be determined in the following paragraph by discussing influence tactics and stakeholder strategies in general. Afterwards influence tactics more specific to the local community are identified.
2.2.2 Stakeholder influence strategies
Frooman (1999) constructs a general model to classify influence strategies used by stakeholders. Frooman (1999) proposes four main types of influence strategies. These influence strategies are dependent on the relationship between the stakeholder and the firm.
This interdependence is defined by resource dependence theory, which states that the stakeholders have more power over the firm when the firm is reliant on the resources the stakeholder possesses (Frooman, 1999).
The first two strategies are conducted when the stakeholders want the enterprise to
alter its current business practices. This is often difficult since in this case the firm needs to
conduct business in a different, less efficient, more expensive way. The first strategy is the
withholding strategy, which entails that the specific stakeholder withholds from providing the
17 specific resource to the firm. An example of this type of strategy is a strike or the threat of conducting a strike. To execute this strategy, the threat needs to be valid. So, the benefits of cutting off the resource outweigh the possible negative effects for the stakeholder. Secondly, there is the usage strategy. The usage strategy means that the resource is available but under specific requirements. This is often done when the stakeholder wants to alter something but is heavily dependent on the enterprise for conducting business. In both cases, the stakeholder can conduct the influence strategy directly or use a third party. When the strategy is
conducted by the stakeholder itself, it is a direct strategy. When the strategy does not target the enterprise directly but makes use of an independent third party, for example, they pressure the firm through the media or use litigation, it is an indirect strategy (Frooman, 1999).
2.2.3 Influence tactics from the local community
Based on the research of Frooman (1999) it can be concluded that stakeholders oftentimes use four different types of influence strategies in general. To verify which influence strategies apply to the influence strategies used by local communities near mining sites, the research from Arenas et al. (2020) will be examined. Arenas et al. (2020) compared two communities near a mining site in Peru and the level of community influence capacity each one had on the mining enterprise. Therefore, the influence tactics identified by Arenas et al. (2020) are specifically applicable to communities near mining sites. The influence tactics used by the local communities were one of the factors to determine the level of community influence.
Arenas et al. (2020) describe influence tactics as the activities done by the local community to influence the enterprise. This involves activities containing resistance, communication and negotiation techniques.
Therefore, the influence tactics were divided into resistance tactics and negotiation
tactics. Both resistance and negotiation tactics can be direct and indirect. A few examples of
resistance tactics are lawsuits, contacting the media and working together with an NGO. The
18 negotiation tactics from Arenas et al. (2020) are mainly tactics used to compromise, examples of these are negotiations for land or settlements. See Figure 1 (Arenas et al., 2020, p. 746) for the codes used to structure the data for both resistance and negotiation tactics.
Figure 1. Data structure: codes for influence tactics. Reprinted from “Community Influence Capacity on Firms: Lessons from the Peruvian Highlands,” by Arenas, Daniel., Murphy, Matthew., Jauregui, Kety, 2020, Organization Studies. 41(6), p. 746.
Despite some large similarities between the mining sites in Sub-Saharan Africa, these codes do not cover all the influence tactics relevant for local communities near mining sites in Sub- Saharan Africa. For example, in the case study from Newenham-Kahindi (2011) tactics such as protests, report production and blockades are often used by the local community near the mining site of Barrick. Therefore, the codes retrieved from Arenas et al. (2020) will be complemented with the stakeholder influence strategies developed by Hendry (2005).
Hendry (2005) conducts an empirical case study in which NGOs were the stakeholders influencing the firm. This case study draws on the stakeholder influence strategies from Frooman (1999) in which the strategy best suited for a stakeholder depends on the level of interdependence of resources between the enterprise and the stakeholder (Frooman, 1999;
Hendry, 2005). The influence strategies identified by Hendry (2005) show many similarities
with the codes from Arenas et al. (2020) but are more extensive. Therefore, the influence
strategies from Hendry (2005) are used to complement the codes from Arenas et al. (2020) to
make sure that all the possible influence tactics in mining communities in Sub-Saharan Africa
19 are included. Nevertheless, it remains important to acknowledge that the case study from Hendry focuses on NGOs as a stakeholder and not on communities.
The study shows that direct withholding strategies are often used by NGOs when there is a low level of interdependence between the firm and the NGO. In contrast, when there is high interdependence, a direct usage strategy is more likely to be used. Another situation arises when the enterprise has more power. In this case, the stakeholder more often uses a third party to influence the enterprise. This third party will most likely be a stakeholder with relatively high stakeholder power. The general interaction between the possible strategy used and the level of interdependence between stakeholders and the firm is shown in Table 1 (Hendry, 2005, p. 81).
Typololoy of influence strategies
Note. Resource relationships in parentheses; general strategy type in italics; adapted from Frooman, 1999. Reprinted from Stakeholder Influence Strategies: An Empirical Exploration,” by Hendry, J. R. Jamie, 2005, Journal of Business Ethics. 61, p. 81.
Based on these general influence strategies stakeholders can conduct, Hendry (2005)
identifies specific stakeholder influence strategies that apply to the relationship between the
stakeholder, in the case study of Hendry (2005) an NGO and the firm. Therefore, a direct
withholding strategy is the use of a blockade, but an indirect withholding strategy requires the
help of a third party, in this case customers. When this is applied to an influence tactic used
by the local community an ally may be an NGO. An example of an indirect usage strategy is
letter-writing campaign, indirect usage strategies are applied when the stakeholder is
20 dependent on the firm, but the firm is not dependent on the stakeholder. These stakeholder strategies are categorized in Figure 2 (Hendry, 2005, p. 96).
Figure 2. Specific influence strategies within Frooman (1999) typology. Reprinted from “Stakeholder Influence Strategies: An Empirical Exploration,” by Hendry, J. R. Jamie, 2005, Journal of Business Ethics. 61, p. 96.
These influence strategies show some similarities with the codes from Arenas et al. (2020) Both articles mention litigation, seeking the attention of the public, by either a letter-writing campaign or pressuring firms through the media and partnerships. These similarities show that the influence strategies from Hendry (2005) are also partly applicable to the influence tactics used by the local communities in mining sites. Additionally to the codes from Arenas et al.
(2020) the communication strategies include influence tactics not used mentioned in the codes. Communication strategies are influence tactics that aim to inform potential partners and the outside world about current problems the stakeholders deal with. Thus, the main topic of analysis will be the influence tactics used by local communities in Sub-Saharan Africa to influence the mining enterprises. The codes from Arenas et al. (2020) are used to determine to what extent and which influence tactics are used by the local community. To provide a more comprehensive overview of all relevant influence strategies, these codes will be
complemented with influence strategies from Hendry (2005). In the following section, the
relationship between institutional voids and influence tactics will be constructed.
2.3 The relationship between institutional voids and influence tactics from the local community
Based on the existing literature the following propositions are developed. The presence of regulatory and legislative pressures influences how firms interact with communities and engage in community development (Marquis, & Battilana, 2009). The absence of institutions results in other parties attempting to fill in these gaps. Kolk and Lenfant (2015) focus on partnerships between enterprises and non-governmental actors. Kolk and Lenfant (2015) use as an example partnerships in the extractive industries in the Democratic Republic of Congo, where partnerships between firms, NGOs and local communities often exclude local
government officials. Therefore, it is expected that in countries with a weak institutional environment, local communities reach out for allies and partnerships to participate in multi- stakeholder dialogue to fill in the institutional voids. Subsequently, it is expected that communities located in these countries engage more in direct usage and negotiation tactics.
Working proposition 1: Communities located in countries with a weak institutional environment are more likely to use direct usage and negotiation tactics, such as multi- stakeholder dialogue and partnerships, compared to countries with a stronger institutional environment
Besides partnerships, local communities could turn to protests and blockades due to the weak institutional environment. In Tanzania, the local community tried to influence Barrick with protests, in which violent outbursts occurred, in combination with less violent tactics, such as contacting the media and lobbying which are resistance influence tactics (Newenham-
Kahindi, 2011; Arenas et al., 2020). These protests and blockades are forms of the
communication strategies established by Hendry (2005), see Figure 2 (Hendry, 2005, p. 96)
for the complete list. Moreover, blockades are also part of direct withholding strategies, if the
22 objective is to withhold access or a resource to the firm. Direct withholding and resistance strategies are only conducted when the benefits outweigh the risks for the local community. In addition, withholding and communication strategies are mainly conducted when the firm is highly or partly dependent on the resources of the local community. This is in line with the statement of Hendry (2005) that communication strategies are primarily used when the company is dependent on the community, but the community is also dependent on the company, for example through labour.
Accordingly, it is suggested that the benefits of using resistance and withholding strategies outweigh the consequences for the local communities. Since the local communities often lack the property rights of the specific resources or said otherwise the specific property rights of the natural resources or related ground are under dispute, they cannot challenge the firms directly through withholding and resistance strategies. Nevertheless, the local
community has the power to exercise communication strategies such as roadblocks and protests which are often accompanied with violence (Hendry, 2005). Subsequently, if the institutional gaps are higher, the local community might be more prone to violent
Working proposition 2: Communities located in countries with a weak institutional environment are more likely to use violent communication strategies, such as protests and blockades, compared to countries with a stronger institutional environment
Besides the contextual aspect of institutional voids, another factor that might affect how the
community tries to engage with the enterprise is the ownership structure. In the following
section the possible influence of different ownership structures is discussed.
2.4 The nature of the mining enterprise; ownership structure
Whether a firm is private-owned or state-owned has many implications for how these firms conduct their business and how they interact with the local community. The differences in ownership structures between SOEs and POEs are relevant for the mining industry in Sub- Saharan Africa since both state-owned and private-owned mining enterprises conduct their business in this area.
The differences between SOEs and POEs are especially relevant in developing countries where the business environment is less stable due to the presence of institutional voids. The expectations from the local community can differ highly between domestic SOEs and domestic POEs, which possibly influences the relationship between institutional voids and the influence tactics used by the local community.
2.4.1 State-owned enterprises
Lazzarini and Musacchio (2018) define SOEs as enterprises that are fully owned by the government or owned by the government in combination with private investors in funds. In the latter cases, the government can both have a majority or minority ownership. Due to this majority or minority ownership the government has the possibility to influence the business decisions from the SOE. Despite advantages for SOEs such as favourable loans and
government grants, there are also disadvantages. Disadvantages are government involvement, dealing with set requirements for receiving the funds and SOEs are obliged to pursue
objectives not in line with the economic objectives of the firm, like environmental or developmental objectives. Due to this deemphasis on economic objectives and more
governmental interference, SOEs are often less efficient and profitable than POEs (Lazzarini,
& Musacchio, 2018; PPIAF, & IFC, 2013). Despite these negative effects, SOEs are
extremely important for development projects in developing countries and they are considered
as key factors in the economy and institutional environment (Redding, Xie, & Tang, 2018).
24 Many SOEs are present in the mining industry in Sub-Saharan Africa, examples of fully and partially state-owned enterprises in Sub-Saharan Africa are Gecamines in the Democratic Republic of Congo, STAMICO in Tanzania, ZCCM-IH in Zambia and ZCDC in Zimbabwe (Natural Resource Governance Institute, n.d.).
SOEs can both be domestic or owned by the government of another state. In the case of domestic state-owned enterprises, the SOEs often have a strategic objective for the surrounding environment and communities, such as providing the community with water, infrastructure, healthcare or communication channels. Unfortunately, most of these SOEs fail to achieve both developmental objectives and economic profits (Musanzikwa, & Ramchander, 2018). Since the government sets developmental objectives for these firms, the local
communities living near mining sites of SOEs might have higher expectations of the social responsibility and developmental role the firm will have. Unfortunately, SOEs face
difficulties achieving these objectives due to a lack of resources and the absence of profits.
Wang et al. (2017) state that SOEs have good relationships with the government and local authorities but neglect the interaction and communication with the local community. Most local communities near mining sites experience the interaction as top-down and one-way, which makes them feel left out.
Besides SOEs owned by the home government, SOEs can also be owned by foreign governments. Especially in the extractive industries SOEs internationalize and enter foreign, developing markets, mostly with acquisitions and greenfield projects. Due to this, the foreign SOE has direct ownership of the subsidiary in the host country (Kowalski, Büge,
Sztajerowska, & Egeland, 2013). These direct investment takes take predominantly place in the extractive industries (Redding et al., 2018).
Developmental projects initiated by these foreign SOEs are determined by
predetermined goals set by the foreign government. Since these SOEs are not owned by the
25 home government of the enterprise their developmental objectives might differ from
developmental objectives from the home government. Besides investments in the mining sector, these SOEs also invest in infrastructure, public utilities, the banking and finance sector. These investments in the infrastructure and public utilities are done to diversify the investment risk of these SOEs, not to meet predetermined, developmental objectives by the host government (Redding et al., 2018). Since these SOEs do not act in order to meet development goals, but simply to diversify their investment risk, the attitude of the
community and their influence tactics differs from the influence tactics used to communicate with SOEs from their home country.
Additionally, local communities often need to communicate with the mining
enterprises without the help of the government. When the home government is not involved, the importance of the demands of the local communities might be subordinate to the
companies’ profits and demands of the foreign government (Murombo, 2013). Due to this decreased focus on the needs of the community, communication might be more tense and difficult, which could result in more violent and hostile influence tactics.
2.4.2 Private-owned enterprises
Besides SOEs, POEs are also present in the mining industries in Sub-Saharan Africa.
Originally, POEs primarily focus on projects aimed at contributing to the financial position of the company. One way POEs could do this is by using local employees instead of foreign employees in the mining site because they are less expensive (Weng et al., 2017). The use of domestic labour happens mostly with labour where no high education is required, high skilled workers often come from abroad instead of from the host community (Amos, 2018).
The increased awareness of the community as a stakeholder and the importance of the
reputation of POEs are reflected in the increased participation of POEs in developmental
projects. In line with stakeholder theory, companies are expected to take on more
26 responsibility and accountability than just the shareholders. Therefore, private mining
enterprises in Sub-Saharan Africa are expected to engage in social and developmental activities. This means that developing countries expect POEs to engage in activities such as education, healthcare and social services. Based on a study conducted in Ghana by Amos (2018) on community perceptions in the gold mining industry it was concluded that most community members were aware of the social responsibility of the firm but understood the primary economic objectives of the firm. The local community was more considerate of the economic objective of the enterprise in comparison with SOEs. This is different from the community expectations from SOEs, where the local community expected engagement in developmental objectives even when the enterprise was not profitable.
Despite this more lenient attitude, participation in developmental projects is expected when there is an immediate need by a host community, for example when they are threatened by the business activities of the mining enterprise. When such a situation takes place, the communities expect to be in direct contact with the POE (Amos, 2018).
Despite the initiation of developmental projects, most communities were not
completely satisfied with the current status of these projects. Additionally, some community members perceive the projects more as a public relations stunt than a project that improves the situation of the host community.
Based on the research from Amos (2018) it is suggested that the local community has
more understanding of the economic situation of POEs. Nevertheless, when a threat occurs
direct influence tactics are used to contact the POE. So, in this case the local community is
more likely to have direct contact in the form of direct usage strategies. In the following
section the implication that these differences in ownership structures might have on the
relationship between institutional voids and influence tactics is explained.
2.5 Influence of the nature of the firm on the relationship between institutional voids and influence tactics from the local community
As proposed, a higher presence of institutional voids might result in more direct usage and negotiation tactics and more violent communication strategies. Based on the existing literature the following propositions about how the ownership structure influences this relationship are constructed.
2.5.1 Influence of the nature of the firm: state-owned
Local communities have higher expectations of the developmental projects and initiatives of an SOE than local communities have of an POE. Consequently, when the SOE upholds the expectation of executing developmental projects, communication and interaction improve.
According to the existing literature, SOEs are more likely to engage in community projects, due to pressures from the government (Martinez, & Franks, 2014; Lazzarini, & Musacchio, 2018). Therefore, the effect of the presence of institutional voids might be mitigated when the firm is an SOE. Consequently, less violent communication strategies and direct usage and negotiation tactics are used with domestic SOEs.
Working proposition 3: In the case of a domestic SOE, it is expected that the negative effect of a weak institutional environment is mitigated by the initiation of developmental projects, which results in less violent communication strategies and direct usage and negotiation tactics.
In the case where the SOE is owned by a foreign government, the influence tactics from the local community probably differ. Foreign SOEs that invest in the extractive industries in Sub- Saharan Africa have different objectives than domestic SOEs. Due to a lack of home
government involvement and the difference in objectives, it is expected that fewer
developmental projects are initiated. Therefore, the influence tactics from the local
28 community might be more hostile and violent than the influence tactics used to influence domestic SOEs. So, when the SOE is foreign instead of domestic, the mitigating effect of the SOE on the relationship between the level of institutional voids and the influence tactics diminishes. It might even increase the potential negative effects of the presence of institutional voids on the influence tactics used when the SOE is foreign.
Working proposition 4: In the case of a foreign SOE it is expected that the negative effect of a weak institutional environment is enhanced by the lack of developmental projects, which results in more violent communication strategies and direct usage and negotiation tactic
2.5.2 Influence of the nature of the firm: private-owned
It is expected from POEs to engage in developmental projects, but there is more understanding of the economic situation of the enterprise among the local community compared with SOEs (Amos, 2018). These projects from POEs are mainly done to raise awareness and to benefit the financial position and business environment surrounding the enterprise. An exemplary project is the infrastructure project from Barrick, which accounts for more than half of the expenses made on developmental projects (Newenham-Kahindi, 2011).
Despite these projects, local communities experience difficulties with regard to direct communication channels with POEs. It is often considered to be top-down, limiting possible partnerships and insights from the local community (Newenham-Kahindi, 2011; Martinez, &
Franks, 2014). Martinez and Franks (2014) even state that local communities felt that most projects were done to acquire investors, which complicates communication with the POE.
Due to the lack of focus on partnerships and multi-stakeholder dialogue, local communities
located near mining sites operated by POEs might more easily turn to other influence tactics
than partnerships, like communication strategies such as protests and boycotts.
29 Working proposition 5: In the case of an POE, it is expected that fewer developmental projects are initiated and therefore less direct usage and negotiation tactics and more violent communication strategies are used.
In the case when threats or dangers against the local community occur as a result of business conducted by the POE, direct influence tactics are more often used to influence the POE. This results in more direct negotiation and usage strategies. After such a threat or danger,
compensatory projects were often initiated by the POE which improved the relationship between the local community and the POE in the long term (Amos, 2018). Therefore, when a threat or danger has taken place, this enhancing effect might diminish and direct usage strategies will be used by the local community.
Working proposition 6: In the case of an POE it is expected that developmental projects are
initiated after a threat or danger to the community occurs, afterwards more direct usage and
negotiation tactics and less violent communication strategies are used.
3. Research Design and Methodology
In this chapter the research design and methodology are described. The research design and corresponding methodology are based on the research question: In what way does the nature of the ownership structure of the mining enterprise influence the relationship between institutional voids and the influence tactics used by the local community? The research design, case selection, case study data collection and case study data analysis are described in detail. Finally, the trustworthiness, credibility and authenticity of the research are described.
3.1 Research design
Qualitative research is appropriate for research that tries to understand a real life phenomenon from the perspective of the object that is being researched (Gupta, & Awasthy, 2015). This fits the objective of this research, to understand the influence tactics used, by using the community perspective and to gain insights about a certain phenomenon by using narratives and descriptions.
In line with most qualitative research, an interpretivist standpoint is taken. This
acknowledges that there is no complete objectivity and there remains subjectivity in the
interpretation by the researcher of the narratives, interviews and documents analysed in this
study (Gupta, & Awasthy, 2015; Harrison, Birks, Franklin, & Mills, 2017). To answer the
research question, a case study is conducted. Yin (2003, p. 13) defines a case study as
follows: “A case study is an empirical inquiry that investigates a contemporary phenomenon
within its reallife context, especially when the boundaries between phenomenon and context
are not clearly evident”. By conducting a case study this research aims to describe and gain
an understanding of the influence tactics used, especially by describing the influence tactics
used in their natural settings (Yilmaz, 2013). These objectives fit the study's exploratory and
descriptive purpose, which is to understand how this relationship between institutional voids
31 and influence tactics is influenced by the different ownership structures of the firms operating near these communities.
Furthermore, the research has an inductive approach as this suits the exploratory objective to understand the relationships among the phenomena researched. Additionally, inductive research is suitable for qualitative research that aims to develop theory resulting from the findings (Thomas, 2006). Based on the literature working propositions are constructed on how the presence of institutional voids impact the influence tactics. These propositions are constructed to define expected connections resulting from the literature and to regulate the case study and focus data collection during the process (Baxter, &, Jack, 2008).
Despite the formation of propositions, it is expected that the findings may be contradictory to the preliminary expectations, the approach remains inductive (Baxter, &, Jack, 2008).
Based on the research question the main unit of analysis are the influence tactics used by the local communities near mining sites in Sub-Saharan Africa. However, the different institutional voids and ownership structures relevant to the cases require separate data collection and analysis. Being that the influence tactics are the main unit of analysis and the institutional voids and ownership structures are considered to be subunits, the corresponding multiple case study design is embedded (Verschuren, 2003).
3.2 Case Study
3.2.1 Case study selection
Multiple case studies are selected because the aim is to compare and contrast the case studies.
This fits with the theoretical replication logic used in this study, which expresses that the objective is to discover contrasting findings (Baxter, & Jack, 2008; Harrison et al., 2017). In addition, using multiple cases strengthens the comparability and breadth of the study.
Selection of the case study takes place based on the relevance of the cases to the
research question (Eisenhardt, & Graebner, 2007). The final case sampling is based on
32 purposive sampling, which means that the identified cases are selected based on
predetermined criteria (Denieffe, 2020). With purposeful sampling the cases are selected on the premise that these cases provide the most in-depth information. The cases need to be comparable, contain similarities and provide us with contrasting findings.
Before the final sampling, homogenous sampling is used to select cases that meet the same selection criteria (Palinkas, Horwitz, Green, Wisdom, Duan, &, Hogwood, 2015). All possible cases need to consist of mining communities situated in Sub-Saharan Africa. To create a file of relevant mining communities the data in the Community Monitors’ database provided by the Bench-Marks Foundation in South Africa was transferred to excel. The documents in the excel files are categorized based on title, date, location and content of the document. These files are used to group cases per country, province and eventually
communities and to what extent they are applicable to answer the research question. This is done by observing patterns and looking for similarities (Eisenhardt, &, Graebner, 2007).
Important to consider during the data selection process is that data in the excel files from South Africa, Zambia and Zimbabwe are in English. The data from the Democratic Republic of Congo is in French and the data from Angola and Mozambique is in Portuguese, therefore the data in these files first needed to be translated before they can be used.
After this first categorization, theoretical sampling is used to determine the final cases.
With theoretical sampling, data collection and analysis happen at the same time. Where to
collect the next data depends on the prior determined categories (Coyne, 1997). To determine
which cases are relevant and will result in the most interesting findings, it is crucial that the
cases originate from different countries to compare the different institutional voids where the
local communities are situated The presence of institutional voids is determined on a country
level based on data retrieved from the African Development Bank and the World Bank. The
specific measures are the level of the educational system, level of infrastructural development
33 and level of regulatory mechanisms and the financial instability in the capital market.
Subsequently, different national levels of institutional voids are ensured by selecting cases from different countries.
Theoretical sampling regulates that both cases of local communities situated near private-owned and state-owned mining enterprises are selected. This is important to determine whether the different ownership structures influence the relationship between the presence of institutional voids and influence tactics used. Orbis is used to find data about the selected mining enterprises and to establish whether they are state-owned or private-owned. In addition to Orbis, the company websites are examined for additional archival research and understanding of the ownership structure. This leads to the following categorizations, the Frontier SA mine near the Sakania community is owned by Eurasian Resources Group which is a private company and not publicly listed. The other relevant mine in the Democratic Republic of Congo is the Ruashi Mine. This mine is 75% owned by Metorex which is a subsidiary of Jinchuan Group International Resources ltd., a Chinese SOE, due to the majority share the mine is classified as state-owned. The Moatize Mine relevant for the Moatize
community is owned by Vale S.A. a Brazilian publicly quoted enterprise. Vale is listed at the
New York Stock Exchange and Bovespa (Vale, 2021). Therefore, the mine is categorized as
private-owned. The next relevant mine is Kansanshi Mine, which is 80% owned by First
Quantum, a publicly quoted company and listed at the Toronto Stock Exchange (First
Quantum ltd, 2021). Accordingly, the Kansanshi Mine is categorized as private-owned. The
global ultimate owner of the diamond mines relevant to the Chiadzwa community is owned
by ZCDC, which is a Zimbabwean SOE. For the Cuango community the corresponding mine
is the Catanga mine, which is owned by Sociedade de Desenvolvimento Mineiro de Angola
SA, according to Orbis this company is state-owned by the Angolan government. The last two
relevant mines originate from South Africa. The first mine, the Sefateng Chrome Mine, is
34 categorized as state-owned. The majority shareholder is Corridor Mining Resources PTY, a company wholly owned by the Limpopo Economic Development Agency which is a state- owned organization. The last mine is the Siyanda Bakgatla Platinum Mine which is 85%
owned by the private company Siyanda Investments (PTY) Ltd., Siyanda Investments (PTY) Ltd is not publicly listed according to Orbis. Therefore, it is categorized as private-owned.
Since data collection and analysis happens simultaneously, it is noticed which
communities provide the most documents, rich narratives and are most suitable for an in-
depth case study. For each case it is noted for which time frame documents are present in the
Community Monitors’ database. Ensuing this process, the following cases were selected
presented in Table 2.
35 Table 2
Communities selected as case studies
Community Location Mine Owner(s) POE/
Katanga Province, Democratic Republic of Congo
Frontier SA Mine, copper mine
Global Ultimate Owner:
Eurasian Resources Group
POE August 2017 - April 2020
Katanga Province, Democratic Republic of Congo
Ruashi Mine, copper and cobalt mine
Metorex (Global Ultimate Owner Jinchuan Group International Resources ltd):
Gecamines S.A.: 25%
SOE August 2017 - September 2020
Tete Province, Mozambique
Moatize Mine, coal mine
Vale: 85%, Mitsui: 15%
POE September 2017 - October 2020 Kansanshi
Solwezi Province, Zambia
Kansanshi Mine, copper and gold mine
First Quantum (FQM): 80%
POE September 2017 - May 2020
Chiadzwa Community, including Arda Transau Community (relocated community)
Mutare district, Zimbabwe
Marange Diamond Fields, diamond mine
Global Ultimate Owner:
Zimbabwe Consolidated Diamond Company ZCDC
SOE October 2017 - December 2020
Limpopo Province, South Africa
Sefateng Mine, chrome mine
CMR (Corridor Mining Resources PTY a company wholly owned by the Limpopo Economic Development Agency, LEDA, an organ of state): 55% shareholder, three community trusts: 5%
SOE August 2016 - September 2020
Rustenburg Province, South Africa
Siyanda Bakgatla Platinum Mine, chrome mine previously known as Anglo Platinum Union Mine
Siyanda Investments (PTY) Ltd: 85%
The Bakgatla-Ba-Kgafela community: 15%
POE August 2018 - September 2020
Lunda Norte Province, Angola
Catanga Mine, diamond mine
Desenvolvimento Mineiro de Luzamba
SOE September 2017 - September 2020