Natural resource endowment and firm performance: The moderating role of institutional endowment

Abstract

Research SummaryDoes institutional endowment moderate the relationship between natural resource abundance and firm performance? Drawing from institution‐based theories (IBT), we examine the interactive effects of institutional endowment (as indicated by natural resource governance) on firm performance. We use 2013 data of 492 firms from 27 African countries and multilevel techniques to find significant interactions of institutional endowment. We discuss the theoretical and practical implications of these findings for management and organization scholarship.Managerial SummaryThe purpose of this study is to examine the extent to which firm performance differs across countries in Africa as a function of institutional factors given natural resource abundance. We find that firm sales are higher in countries with strong institutions, strong enabling environments, and strong safeguards and quality controls when natural resource abundance is high. When natural resource abundance is low, firm sales and net profits are higher in countries with strong reporting practices, and profit margins are higher in countries with strong safeguards and quality controls.