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Foreign Direct Investment, Institutional Voids, and the Internationalization of Mining Companies into Africa

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  • John M. Luiz
  • Meshal Ruplal

Abstract

The paper investigates the factors influencing the internationalization of mining firms into Africa and the strategies employed. We find that the three most important factors identified by mining houses as influencing their decisions to invest are all related to institutional voids particular to developing countries—security of tenure, political stability and poor infrastructure. South African firms have shown themselves to be adept to doing business in volatile political and institutional environments because of their experience within their home base with relatively weaker institutions. They have therefore developed advantages over multinational enterprises from industrialized countries to doing business in these new frontiers.

Suggested Citation

  • John M. Luiz & Meshal Ruplal, 2013. "Foreign Direct Investment, Institutional Voids, and the Internationalization of Mining Companies into Africa," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 49(4), pages 113-129, July.
    • Handle: RePEc:mes:emfitr:v:49:y:2013:i:4:p:113-129
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    Citations

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    Cited by:

    1. Mbalyohere, Charles & Lawton, Thomas C., 2022. "Engaging informal institutions through corporate political activity: Capabilities for subnational embeddedness in emerging economies," International Business Review, Elsevier, vol. 31(2).
    2. Mbalyohere, Charles & Lawton, Thomas & Boojihawon, Roshan & Viney, Howard, 2017. "Corporate political activity and location-based advantage: MNE responses to institutional transformation in Uganda’s electricity industry," Journal of World Business, Elsevier, vol. 52(6), pages 743-759.
    3. Yang, Ruicheng & Xing, Weize & Hou, Shuxia, 2020. "Evaluating the risk factors influencing foreign direct investment in Mongolia's mining sector: A complex network approach," Emerging Markets Review, Elsevier, vol. 43(C).
    4. Chidlow, Agnieszka & Wang, Jue & Liu, Xiaohui & Wei, Yingqi, 2021. "A co-evolution perspective of EMNE internationalization and institutions: An integrative framework of 5Cs," International Business Review, Elsevier, vol. 30(4).
    5. Jianing Shi, 2022. "Formal Institutional Distance and Innovation from OFDI: Evidence from China," Sustainability, MDPI, vol. 14(9), pages 1-19, April.
    6. Pereira, Vijay & Tuffour, James & Patnaik, Swetketu & Temouri, Yama & Malik, Ashish & Singh, Sanjay Kumar, 2021. "The quest for CSR: Mapping responsible and irresponsible practices in an intra-organizational context in Ghana’s gold mining industry," Journal of Business Research, Elsevier, vol. 135(C), pages 268-281.
    7. Zhu, Ying & Sardana, Deepak, 2020. "Multinational enterprises’ risk mitigation strategies in emerging markets: A political coalition perspective," Journal of World Business, Elsevier, vol. 55(2).
    8. Barnard, Helena & Luiz, John M., 2024. "The South African economic elite and ownership changes in foreign multinationals’ assets during and after Apartheid-era sanctions," Journal of World Business, Elsevier, vol. 59(5).
    9. Katiuscia Vaccarini, 2014. "Psychic distance and FDI: the case of China," Working Papers 1403, c.MET-05 - Centro Interuniversitario di Economia Applicata alle Politiche per L'industria, lo Sviluppo locale e l'Internazionalizzazione.
    10. Barnard, Helena & Luiz, John M., 2018. "Escape FDI and the dynamics of a cumulative process of institutional misalignment and contestation: Stress, strain and failure," Journal of World Business, Elsevier, vol. 53(5), pages 605-619.
    11. Cooke, Fang Lee & Wang, Jingtian & Wood, Geoffrey, 2022. "A vulnerable victim or a tacit participant? Extending the field of multinationals and corruption research," International Business Review, Elsevier, vol. 31(1).
    12. Uchendu Eugene Chigbu & Chigozie Nweke-Eze, 2023. "Green Hydrogen Production and Its Land Tenure Consequences in Africa: An Interpretive Review," Land, MDPI, vol. 12(9), pages 1-20, September.
    13. Das, Khanindra Ch. & Mahalik, Mantu Kumar, 2020. "International subsidiary performance of Indian multinationals in the extractive sector: The role of institutional quality, corruption and investment regime," Resources Policy, Elsevier, vol. 67(C).
    14. Oludotun Fasanya, David & Ingham, Hilary & Read, Robert, 2022. "Determinants of internationalisation by firms from Sub-Saharan Africa," Journal of Business Research, Elsevier, vol. 144(C), pages 951-965.
    15. Mbalyohere, Charles & Lawton, Thomas C., 2018. "Engaging Stakeholders Through Corporate Political Activity: Insights From MNE Nonmarket Strategy in an Emerging African Market," Journal of International Management, Elsevier, vol. 24(4), pages 369-385.
    16. Liedong, Tahiru Azaaviele & Peprah, Augustine Awuah & Amartey, Abednego Okoe & Rajwani, Tazeeb, 2020. "Institutional voids and firms' resource commitment in emerging markets: A review and future research agenda," Journal of International Management, Elsevier, vol. 26(3).
    17. Anderson, John & Sutherland, Dylan & Hurst, Jamie, 2024. "Measuring Chinese MNE activity: The challenge of corporate inversions and capital in transit related FDI," Research in International Business and Finance, Elsevier, vol. 70(PA).
    18. Jonas Fernando Petry & Mohamed Amal & Dinorá Eliete Floriani, 2018. "Institutional Distance, Regional Clusters and Performance of Foreign Subsidiaries: Evidences from Brazil," Brazilian Business Review, Fucape Business School, vol. 15(3), pages 302-316, May.
    19. Luiz, John M. & Barnard, Helena, 2022. "Home country (in)stability and the locational portfolio construction of emerging market multinational enterprises," Journal of Business Research, Elsevier, vol. 151(C), pages 17-32.

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