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Institutional Complementarity and Substitution as an Internationalization Strategy: The Emergence of an African Multinational Giant
Author(s) -
Luiz John,
Stringfellow Dustin,
Jefthas Anthea
Publication year - 2017
Publication title -
global strategy journal
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 2.814
H-Index - 24
eISSN - 2042-5805
pISSN - 2042-5791
DOI - 10.1002/gsj.1143
Subject(s) - internationalization , multinational corporation , diversification (marketing strategy) , institutional theory , complementarity (molecular biology) , emerging markets , business , international business , industrial organization , leverage (statistics) , international trade , economic system , economics , marketing , finance , management , machine learning , biology , computer science , genetics
Research Summary We examine the internationalization decisions made by one of Africa's most successful companies, South African Breweries, as it underwent a period of aggressive expansion. We see processes of both institutional complementarity and substitution at different phases and with different motives. At first it sought countries that played to its strength, namely the knowledge of doing business in environments of institutional uncertainty, but later it pursued an institutional diversification strategy whereby it attempted to minimize its institutional risk exposure. As it became larger, its aspirations increased too, and its over‐exposure to emerging market institutional risk saw it engage in institutional substitution into advanced countries. Through this phased international process, it was able to develop its internal assets, and this enabled the moves into developed markets. Managerial summary We demonstrate that firms can exploit their knowledge of ‘weak’ institutional settings and turn it into a source of advantage as they internationalize into locations with similar institutional ‘weaknesses.’ Using the case of one of Africa's most successful multinational enterprises, we illustrate the value gained from initially capitalizing upon institutional complementarity (utilizing the comparative advantage linked to institutional know‐how) by exploiting the experience of the home country's environment into similar settings. Over time and through learning‐by‐doing, pressure arose to diversify the risk linked with over‐exposure to institutional uncertainty and country risk, and this was associated with the process of institutional substitution into more advanced countries. We see emerging multinational learning and building its capabilities by leveraging its understanding of its home country institutional environment. Copyright © 2016 John Wiley & Sons, Ltd.