Configuring political relationships to navigate host-country institutional complexity: Insights from Anglophone sub-Saharan Africa

An MNE's non-market strategy is its concerted pattern of actions to improve its performance by managing the institutional or societal context of economic competition. The construct takes multiple forms, including corporate social activity, corporate political activity, legal and public sensitization strategies, and self-categorization strategies. However, corporate social activity and corporate political activity are the two principal non-market strategies. MNEs engage in corporate social activity with multiple societal stakeholders to improve social and environmental practices, and in corporate political activity to deal with home-country and host-country political actors. Prior research has examined under what conditions MNEs engage in corporate political activity, but extant studies have emphasized ties between MNEs and national government political institutions. Some earlier studies have drawn on multiple theoretical perspectives such as a firm-specific or country-specific advantage, the resource-based view, or combinations of these, and argue that such ties help MNEs minimize host-country political risk and operating and transactional costs, and thereby enhance the performance of their subsidiaries. While our understanding of how corporate political activity can improve subsidiary performance has grown, empirical studies of the relationship between corporate political activity and performance suffer from two major limitations. First, while they have identified a wide variety of host-country political institutions, some formal, such as national governments, and some informal, for example, local chieftaincies and religious bodies, we still lack knowledge of how ties with them can be configured to best enhance MNE subsidiary performance. Second, while some studies have suggested that the performance effect of corporate political activity may be contingent upon an array of host-country institutional and market environment conditions, there has been limited theoretical specification and little empirical examination of these boundary conditions. To address these limitations, this study examines how ties with multiple host-country political institutions contribute to MNE subsidiary performance in countries with weak formal institutions. We suggest that forging relationships between subsidiaries and host-country government actors, local chieftains, and religious leaders generates regulative, normative, and cultural-cognitive political resources. We integrate institutional and configuration theories to argue that similarity to an ideal configuration of the three political resources contributes to MNE subsidiary performance, and that the more dysfunctional host-country institutions, the greater the impact on performance. We test our hypotheses using primary and archival data from 604 MNE subsidiaries in 23 Anglophone sub-Saharan African countries and find support for our hypotheses. The study advances the multinational non-market strategy literature in two main ways. First, by integrating the Scottian view of institutions with configuration theory, we show how the capability to achieve similarity to an ideal configuration (SIC) of political resources contributes to performance. We apply Scott's view of institutions as regulative, normative, and cultural-cognitive to the socio-cultural institutional complexity of sub-Saharan Africa, examining ties with national government actors, local chieftains, and religious leaders. The three corporate political activities generate separate but interrelated relational political resources that constitute firm-specific advantages. Ties with national government actors can generate regulatory and informational resources in the form of stronger enforcement of laws and regulations and favorable access to information on public policies, including changes in them. Ties with local chieftains can generate both regulatory and normative political capital and help reduce encroachment on intellectual property rights while enhancing local market legitimacy. Finally, ties with religious leaders can generate normative and cultural-cognitive political capital, which confers greater legitimacy on a firm and its brand. We contend that while each type of tie has its benefits, they may also complement each other or serve as substitutes. To gauge the performance outcomes of the interconnectivity between the three types of political resources, we use the systems perspective of configuration theory. We argue that getting close to an ideal configuration of the three political resources increases protection of MNE subsidiary assets and operations in weak host-country institutional environments. It minimizes political risk and operating and transactional costs, lowers vulnerability and volatility of sales revenue, and facilitates the creation and effective functioning of host-country markets and hence MNE subsidiary performance.