Institutional Complementarity and Substitution as an Internationalization Strategy: The Emergence of an African Multinational Giant

TLDR: In this paper, the authors examine the internationalization decisions made by one of Africa's most successful companies, South African Breweries, as it underwent a period of aggressive expansion, and 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.

Abstract: 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.

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Table 2: Significant international activity SAB

Table 1: SAB Interview Respondents

Full text

Institutional complementarity and substitution as an
internationalization strategy: the emergence of an African
multinational giant
Article (Accepted Version)
http://sro.sussex.ac.uk
Luiz, John, Stringfellow, Dustin and Jefthas, Anthea (2017) Institutional complementarity and
substitution as an internationalization strategy: the emergence of an African multinational giant.
Global Strategy Journal, 7 (1). pp. 83-103. ISSN 2042-5805
This version is available from Sussex Research Online: http://sro.sussex.ac.uk/id/eprint/66973/
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Accepted Article
INSTITUTIONAL COMPLEMENTARITY AND SUBSTITUTION AS AN
INTERNATIONALIZATION STRATEGY: THE EMERGENCE OF AN AFRICAN
MULTINATIONAL GIANT
John Luiz*
School of Business, Management and Economics (BMEc)
University of Sussex, Jubilee Building G08
Brighton, BN1 9SL, Great Britain;
and University of Cape Town
Tel: +44 (0)1273 872668
Fax: +44 (0)1273 872668
Email: J.M.Luiz@Sussex.ac.uk
This article is protected by copyright. All rights reserved.
This article has been accepted for publication and undergone full peer review but has not
been through the copyediting, typesetting, pagination and proofreading process, which
may lead to differences between this version and the Version of Record. Please cite this
article as doi: 10.1111/gsj.1143

Accepted Article
Dustin Stringfellow
Graduate School of Business, University of Cape Town
Breakwater Campus, Portswood Road
Green Point, 8005, South Africa
Tel: +27 (0)21 406 1444
Fax: +27 (0)21 406 2116
Email: dustinstringfellow@gmail.com
Anthea Jefthas
Graduate School of Business, University of Cape Town
Breakwater Campus, Portswood Road
Green Point, 8005, South Africa
Tel: +27 (0)21 406 1444
Fax: +27 (0)21 406 2116
Email: ajefthas@hotmail.com
* Please address correspondence to this author
This article is protected by copyright. All rights reserved.

Accepted Article
Key words: Emerging multinational enterprises; institutional voids; African multinational;
firm and country specific advantages; institutional leverage capability
Abstract
Plain language summary:
We examine the internationalization decisions made by one of Africa’s most successful
companies, South African Breweries, while 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 which 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.
Technical 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 Africa’s most successful multinational enterprises we
illustrate the value gained from initially capitalizing upon institutional complementarity (utilizing
This article is protected by copyright. All rights reserved.

Accepted Article
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 an emerging multinational learning and building its capabilities by
leveraging off its understanding of its home country institutional environment.
This article is protected by copyright. All rights reserved.

Frequently asked questions

Q1. What are the future works in this paper?

A cc ep te d A rti cl e currency risk, and this raises the possibility of a process of institutional substitution into more advanced countries. They advocate that future research should explore the possibility that ILC may help firms leverage institutions in home and host countries and that such capability will be of relevance for firms operating in multiple and diverse institutional settings. Nonetheless the authors do not wish to generalize beyond that which a case study permits but believe it provides a basis for further research. The study has some limitations which also present opportunities for future research. 

Q2. What are the contributions in this paper?

The authors examine the internationalization decisions made by one of Africa ’ s most successful companies, South African Breweries, while it underwent a period of aggressive expansion.