business seeking legitimacy in africa: presented at ifama 2014 by dr domenico dentoni

Business Seeking Legitimacy in Africa:The Role of Core Strategy and Country of Origin

Dr. Domenico Dentoni, Assistant ProfessorManagement Studies Group, School of Social Sciences, Wageningen University

Dr. Verena Bitzer, Post-Doctoral ResearcherGraduate School of Business, Capetown University

Dr. Jessica Duncan, Assistant ProfessorRural Sociology Group, School of Social Sciences, Wageningen University

Mr. Dimitris Mitsopoulos, Graduate StudentManagement Studies Group, School of Social Sciences, Wageningen University

International Food and Agribusiness Management Association SymposiumCapetown, June 16th-20th, 2014

BackgoundAgribusiness in Africa:• Competitive pressure• Social, political and ecological pressure

Companies need to keep or build legitimacy in society while securing supply and/or mantain markets

Broad Question:• What are the different «legitimization strategies»

adopted by agribusiness companies in Africa today?• How do they vary, and why?

Methods: Grounded Theory (1)DATA (2010-now)

- Top 50 largest world food companies (mainly, import from Africa)

- Top 50 largest ag input and food suppliers in Africa (mainly, export to Africa)

- Top 200 largest ag-food businesses («Africa as home»)

- Secondary data on South-South investments in Africa

THEORY

• Institutional Theory & Economics

• Legitimacy and legitimization

• Business Strategy

Glaser and Strauss 1967

Legitimacy TheoryWhy legitimacy matters?• To reduce stakeholder pressure (institutional theory) • To reduce transaction costs (institutional economics)

Three major types of business legitimacy in society (Ashforth & Gibbs 1990):

In contexts of uncertainty, companies adopt «paradox strategies»: trying to achieve all three of them at same time (Scherer et al. 2013)

1) PRAGMATIC 2) COGNITIVE 3) MORAL

Methods: Grounded Theory

• Inductive Creation of Typologies (Fiss 2011)• Theoretical vs. Statistical Sampling (Yin 1984)• Within-Case and Across-Case Triangulation (Eisenhardt 1989)• Set-Theoretical Approach (Fiss 2007)

Attribute Values

Strategy for Legitimacy Moral / Pragmatic /Cognitive Legimitacy

Stakeholder Pressure Low / High

Core Strategy Procurement / Marketing / «Home»

Country of Origin Developed / Emerging / Africa

Institutional Forms Individual / Bilateral / Multilateral

Results: «Western» Companies (1)Typology 1:

«Western Sellers»Typology 2:

«Western Buyers»Typology 3:

«Western Company based in Africa»

Ex. Syngenta Ex. Unilever Ex. Nestlé

Strategy forLegitimacy

Pragmatic Moral Pragmatic

Stakeholder Pressure High High Medium

Core Strategy Expand markets in Africa

Expand supply from Africa

Expand markets and supply in Africa

Headquarter Country of Origin

1. USA, 2. Europe 1. Europe, 2. USA 1. Europe, 2. USA

Main arguments and related institutional forms

Scientific arguments supporting the adoption of new varieties of ag inputs and food ingredients

Bilateral partnerships industry/academia (IFAMA?)

Participating to societal debate on «inclusive development», «fostering entrepreneurship» and linking «farmers to markets».

Multilateral partnerships industry/NGO/civil society/academia

Arguments on «supply chain efficiency», «food security» and «job creation».

Bilateral partnerships with NGOs (including company foundations).

«South-South» and African Companies (2)Typology 4:

«South-South Investors»

Typology 5:«South-South

Sellers»

Typology 6:«African

companies»

Ex. Hubei Lianfeng Overseas Agricultural Corporation (China)

Ex. Odebrecht Agroindustrial (Brazil)

Ex. Shoprite

Strategy forLegitimacy

Pragmatic Cognitive Cognitive

Stakeholder Pressure Medium Low Low

Core Strategy Expand supply (especially land) and market in Africa

Expand markets in Africa Expand markets and supply in Africa

Country of Origin 1. China; 2. India; 3. Middle East; 4. Brazil

1. China; 2. India; 3. Brazil; 4. Middle East

1. South Africa, 2. Nigeria, 3. Kenya

Main arguments and related institutional forms

Infrastructure and finance in exchange of (mainly) land. Bilateral partnerships with Govt.

Bringing technology and increasing competition in ag-food input markets .Bilateral partnerships with Govt.

Philantropy through company foundations.No partnerships.

Conclusions

Company Core

Strategy

Company Region of

Origin

Legitimization Strategies

Institutional Forms

Broad Initial Question:• What are the different «legitimization strategies» adopted by agribusinesses in Africa

today?• How do they vary, and why?

• Businesses adopt no «paradox strategy» (Scherer et al. 2013), but «contingency strategy»

• Future research: testing and refining in two steps – interviews and survey

Thank you. Questions?

Domenico DentoniDomenico.Dentoni@wur.nl

Management Studies GroupGlobal Center for Food Systems Innovation

Wageningen University