Understanding cross‐border mergers and acquisitions of African firms: The role of dynamic capabilities in enabling competitiveness amidst contextual constraints

William Y Degbey,Taina Eriksson,Nnamdi Oguji,Peter Rodgers

doi:10.1002/tie.22138

Abstract

AbstractThis article builds on existing international business literature that examines the drivers of cross‐border mergers and acquisitions (M&As) within emerging and developing economy contexts, theoretically exploring how dynamic capabilities (DCs) are connected to these drivers, and how African emerging multinational enterprises (EMNEs) can pursue them to achieve competitiveness. The article's contribution is the development of a DC framework and testable propositions for African EMNEs' cross‐border M&As. The theoretical framework shows the division of DC dimensions—sensing, seizing, and transforming—and establishes explanations for their linkage with institutional and resource drivers for African EMNEs' cross‐border M&A competitiveness. In addition, the article outlines managerial implications to this effect. Overall, the article contributes to the emerging literature on the international expansion of African EMNEs through cross‐border M&As by underscoring the role of DCs.

Highlights

Research shows that mergers and acquisitions (M&As), especially cross-border ones, have become a fundamental international growth strategy for many firms from emerging or developing economies (Degbey & Ellis, 2017, 2019; Liou & Rao-Nicholson, 2017; Oguji & Owusu, 2017; Peng, 2012)
Responding directly to recent calls for more of a scholarly focus on the drivers and outcomes of the international expansion of African firms (Boso et al, 2018; Liou & Rao-Nicholson, 2017), this article has explored how dynamic capability (DC) enhance the competitiveness of emerging multinational enterprise (EMNE) from Africa through cross-border M&As
It does so by focusing on how DCs link to core drivers of M&As undertaken by African EMNEs

Summary

| INTRODUCTION

Research shows that mergers and acquisitions (M&As), especially cross-border ones, have become a fundamental international growth strategy for many firms from emerging or developing economies (Degbey & Ellis, 2017, 2019; Liou & Rao-Nicholson, 2017; Oguji & Owusu, 2017; Peng, 2012). The transition from socialism to capitalism in African countries, for example, as a driver, underscores the economic structures forming the foundations that will constrain or enhance the actions of internationalizing African firms to achieve their desired competitiveness These logics provide cognitive and practical templates for organizations (in this case African EMNEs) on how to perform certain tasks and help advance the study of organizations and institutions (Thornton & Ocasio, 2008). The following discussion provides a brief overview of the extant literature relating to each of these drivers that are organized under the theoretical building blocks of institutions: the uncertainty of the African context, the increasing influx of diverse organizations in Africa, formal and informal economies' interconnectedness, transitioning from socialism to capitalism in African countries; and resources: national pride versus African pride, latecomer disadvantage. We argue that managers of African multinationals with an in-depth understanding of weak home-country institutional frameworks (e.g., poor enforcement of legal rights, under-developed product, financial, and labor market institutions, and unpredictable regulations), possess skills that provide them with advantages for investing in more institutionally advanced nations because they have become skilled at overcoming obstacles by seeking alternative paths and creative solutions around business and institutional challenges

TABLE 1 The key dimensions of institutional drivers

| CONCLUSIONS