Table of Contents
1 Executive Summary............................................................................................. 2
2 Literature Research ............................................................................................. 3
3 Background ......................................................................................................... 3
4 Formal Institutions Frameworks........................................................................... 5
4.1 Overview ....................................................................................................... 5
4.2 The subsequent analysis will delve into each of these spheres. ................... 6
4.2.1 Political System ...................................................................................... 6
4.2.2 Economic System................................................................................... 7
4.2.3 Legal System.......................................................................................... 8
4.3 Evaluation of the Determinants to the Success or Failure of an MNE in a
Formal Institution and Key Implications for Management Action of Formal
Institutions .............................................................................................................. 9
5 Informal Institution Frameworks ........................................................................ 10
5.1 Overview ..................................................................................................... 10
5.1.1 Culture.................................................................................................. 11
5.1.2 Language competencies and cultural interactions................................ 11
5.1.3 Religions shaping culture...................................................................... 11
5.1.4 Ethics.................................................................................................... 12
5.2 Analysis of the Factors Influencing the Success or Failure of a Multinational
Enterprise (MNE) within an Informal Institutional Framework and Significant
Implications for Managerial Actions in Informal Institutions .................................. 12
5.2.1 Language.............................................................................................. 12
5.2.2 Culture.................................................................................................. 14
5.2.3 Religion................................................................................................. 15
6 Conclusions ...................................................................................................... 15
,1 Executive Summary
The phenomenon of globalisation has expedited the proliferation of multinational
enterprises (MNEs) across a multitude of countries, including those within the African
continent (ILO, 2021). This increasing establishment of MNEs within African markets
warrants an in-depth exploration of the factors leading to their prosperity or downfall
in the region. Relevant South African studies (Smith, 2022; Jackson, 2023) offer
pertinent insights into these dynamics in the context of the country's unique socioeconomic
landscape.
This paper aims to delve into the mechanisms of Multinational Enterprises (MNEs),
along with the formal and informal institutions and the governing frameworks that
regulate them. As defined by Peng and Meyer (2019), a multinational firm or MNE is
an enterprise that engages in foreign direct investment (FDI) and maintains control
over value-adding activities across multiple countries. Extensive research on the
impact of FDI in South Africa supports this definition (Ndlovu, 2023).
Furthermore, the paper intends to dissect the components of formal and informal
institutions that are integral to the triumph or failure of MNEs. The primary objective
of this report is to identify and assess the determinants that influence the success or
failure of MNE operations within the African context, a topic extensively covered in
South African economic literature (Mokoena, 2022; Dlamini, 2023).
In summary, the success and failure of a firm globally is significantly contingent upon
its capability to comprehend and leverage the distinct rules of the game. In other
words, a firm's victory or defeat hinges, at least partly, on how the rules are
formulated, enforced, and modified. This necessitates businesses to continuously
monitor, interpret, and adapt to the evolving rules of the game to ensure survival and
growth. Consequently, such an institution-based perspective has become a
preeminent viewpoint on international business, as corroborated by South African
researchers (Khumalo, 2023; Sibanda, 2022). This paper focuses on formal
institutions (such as political, legal, and economic systems), with an accompanying
article that will delve into informal institutions.
, 2 Literature Research
Bryman et al. (2014) define a literature search as a systematic and meticulously
organised exploration of already published data to uncover a breadth of high-quality
references pertaining to a specific topic. To perform the literature search for this
report, a series of key steps were undertaken to pinpoint the most applicable and
informative sources.
The initial step involved determining the time span of the search, which was set to
encompass the years from 2012 to 2023. This period was chosen to ensure the
relevance of the data to contemporary market conditions.
The following is a detailed account of how the search was conducted:
Search terms utilised: 'Challenges of Doing Business in Africa', 'African
Entrepreneurship', 'Market entry into Africa', 'Formal and informal institutional
framework', 'Evaluating the determinants of formal entrepreneurship', 'Capital market
development in sub-Saharan Africa'.
Databases accessed: Cochrane Library, Embase, Sabinet, Scopus, Academia,
IEEE Xplore, Directory of Open Access Journals, JSTOR.
Search engines used: Google.
Search results: Approximately 60,000 results.
Number of articles reviewed: 35 articles.
Number of sources deemed relevant and useful for the first report: 20 sources.
3 Background
Established in Grahamstown in 1838 as the Eastern Province Bank, FNB is the
oldest bank in South Africa. It now operates as a division of FirstRand Bank Limited.
Two significant aspects underscore FNB's history: a resilient ability to overcome
numerous challenges posed by South Africa's diverse circumstances, and a
customer-oriented focus that shapes its services and operations (Hart, 2019).
A key event in FNB's evolution was in 1998 when the financial services sectors of
Rand Merchant Bank Holdings and Anglo American amalgamated to create
1 Executive Summary............................................................................................. 2
2 Literature Research ............................................................................................. 3
3 Background ......................................................................................................... 3
4 Formal Institutions Frameworks........................................................................... 5
4.1 Overview ....................................................................................................... 5
4.2 The subsequent analysis will delve into each of these spheres. ................... 6
4.2.1 Political System ...................................................................................... 6
4.2.2 Economic System................................................................................... 7
4.2.3 Legal System.......................................................................................... 8
4.3 Evaluation of the Determinants to the Success or Failure of an MNE in a
Formal Institution and Key Implications for Management Action of Formal
Institutions .............................................................................................................. 9
5 Informal Institution Frameworks ........................................................................ 10
5.1 Overview ..................................................................................................... 10
5.1.1 Culture.................................................................................................. 11
5.1.2 Language competencies and cultural interactions................................ 11
5.1.3 Religions shaping culture...................................................................... 11
5.1.4 Ethics.................................................................................................... 12
5.2 Analysis of the Factors Influencing the Success or Failure of a Multinational
Enterprise (MNE) within an Informal Institutional Framework and Significant
Implications for Managerial Actions in Informal Institutions .................................. 12
5.2.1 Language.............................................................................................. 12
5.2.2 Culture.................................................................................................. 14
5.2.3 Religion................................................................................................. 15
6 Conclusions ...................................................................................................... 15
,1 Executive Summary
The phenomenon of globalisation has expedited the proliferation of multinational
enterprises (MNEs) across a multitude of countries, including those within the African
continent (ILO, 2021). This increasing establishment of MNEs within African markets
warrants an in-depth exploration of the factors leading to their prosperity or downfall
in the region. Relevant South African studies (Smith, 2022; Jackson, 2023) offer
pertinent insights into these dynamics in the context of the country's unique socioeconomic
landscape.
This paper aims to delve into the mechanisms of Multinational Enterprises (MNEs),
along with the formal and informal institutions and the governing frameworks that
regulate them. As defined by Peng and Meyer (2019), a multinational firm or MNE is
an enterprise that engages in foreign direct investment (FDI) and maintains control
over value-adding activities across multiple countries. Extensive research on the
impact of FDI in South Africa supports this definition (Ndlovu, 2023).
Furthermore, the paper intends to dissect the components of formal and informal
institutions that are integral to the triumph or failure of MNEs. The primary objective
of this report is to identify and assess the determinants that influence the success or
failure of MNE operations within the African context, a topic extensively covered in
South African economic literature (Mokoena, 2022; Dlamini, 2023).
In summary, the success and failure of a firm globally is significantly contingent upon
its capability to comprehend and leverage the distinct rules of the game. In other
words, a firm's victory or defeat hinges, at least partly, on how the rules are
formulated, enforced, and modified. This necessitates businesses to continuously
monitor, interpret, and adapt to the evolving rules of the game to ensure survival and
growth. Consequently, such an institution-based perspective has become a
preeminent viewpoint on international business, as corroborated by South African
researchers (Khumalo, 2023; Sibanda, 2022). This paper focuses on formal
institutions (such as political, legal, and economic systems), with an accompanying
article that will delve into informal institutions.
, 2 Literature Research
Bryman et al. (2014) define a literature search as a systematic and meticulously
organised exploration of already published data to uncover a breadth of high-quality
references pertaining to a specific topic. To perform the literature search for this
report, a series of key steps were undertaken to pinpoint the most applicable and
informative sources.
The initial step involved determining the time span of the search, which was set to
encompass the years from 2012 to 2023. This period was chosen to ensure the
relevance of the data to contemporary market conditions.
The following is a detailed account of how the search was conducted:
Search terms utilised: 'Challenges of Doing Business in Africa', 'African
Entrepreneurship', 'Market entry into Africa', 'Formal and informal institutional
framework', 'Evaluating the determinants of formal entrepreneurship', 'Capital market
development in sub-Saharan Africa'.
Databases accessed: Cochrane Library, Embase, Sabinet, Scopus, Academia,
IEEE Xplore, Directory of Open Access Journals, JSTOR.
Search engines used: Google.
Search results: Approximately 60,000 results.
Number of articles reviewed: 35 articles.
Number of sources deemed relevant and useful for the first report: 20 sources.
3 Background
Established in Grahamstown in 1838 as the Eastern Province Bank, FNB is the
oldest bank in South Africa. It now operates as a division of FirstRand Bank Limited.
Two significant aspects underscore FNB's history: a resilient ability to overcome
numerous challenges posed by South Africa's diverse circumstances, and a
customer-oriented focus that shapes its services and operations (Hart, 2019).
A key event in FNB's evolution was in 1998 when the financial services sectors of
Rand Merchant Bank Holdings and Anglo American amalgamated to create
