Investment Climate Constraints as Determinants of Political Tie Intensity in Emerging Countries: Evidence from Foreign Firms in Ghana

Foreign firms in emerging countries face various institutionally-driven challenges. Nonmarket strategy scholars argue that these challenges incite corporate political activity. Consequently, researchers have explored the influence of institutional factors on the choice and extent of political strate...

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Bibliographic Details
Published in:Management international review 2018-10, Vol.58 (5), p.675-703
Main Authors: Liedong, Tahiru Azaaviele, Frynas, Jedrzej George
Format: Article
Language:English
Subjects:
Behavior
Business and Management
Business government relations
Business research
Business Strategy/Leadership
Contingencies
Control
Developing countries
Emerging Markets/Globalization
Foreign companies
Foreign corporations
LDCs
Multinational corporations
Operations Management
Organization
Organizational structure
Political behavior
Political participation
Research Article
Studies
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Summary:Foreign firms in emerging countries face various institutionally-driven challenges. Nonmarket strategy scholars argue that these challenges incite corporate political activity. Consequently, researchers have explored the influence of institutional factors on the choice and extent of political strategies. However, not much is known about how investment climate constraints affect the political ties of foreign firms in contexts other than US, Europe and Asia. Drawing on institutional theory, we propose that firms' exposure to administrative and control constraints as well as the presence of public affairs (PA) functions will lead to political tie intensification. We test our propositions using data from foreign firms operating in Ghana, and find that whereas control constraints strengthen political ties, administrative constraints weaken these ties. The findings also suggest that PA functions and political ties can be substitutes, not complements, depending on the institutional contingencies. Altogether, our study enhances knowledge and understanding of how institutional environments and organizational structures affect the political behaviour of foreign firms in emerging countries.
ISSN:0938-8249
1861-8901
DOI:10.1007/s11575-018-0354-2