The effect of partnering, infrastructure gaps and currency weakness on the cost of an infrastructure-building nonmarket strategy in emerging markets

Abstract

This study examined effect of partnering, infrastructure gaps and currency weakness on the implementation cost of infrastructure-building nonmarket strategy. Limited knowledge on cost of nonmarket strategy existed, leading to absence of meaningful understanding of the business competitive and performance benefits of its implementation. The study was conducted in the mining sector of the South African emerging market, characterized by unavailable or underdeveloped business aiding infrastructure and ageing physical infrastructure. Nonmarket strategy has performance and competitiveness benefits from its implementation as reported in previous studies. Other studies examined its integration with market strategy, taxonomies, antecedents, and internationalization. No studies had examined the implementation cost of nonmarket strategy. To address the gap, hypotheses were developed to answer the research question: what are the effects of strategy option, institutional & economic factors on the cost of infrastructure-building nonmarket strategy implementation? A quantitative method embedded in a cross-sectional survey design using a snowball non-probability sampling technique was used to collect data from 239 participants. Analysis using factor analysis and structural equation modelling showed a positive relationship between a partnering strategy option and cost of implementing infrastructure-building nonmarket strategy likely driven by the absence of: contractual agreements; political ties and networks; project management; regulatory requirement understanding; and capacity building among partners. The relationship with institutional & economic factors was not significant likely driven by the fact that these factors are embedded in the business environment and participants perceived no impact. This study has made significant progress toward the understanding of the cost of implementing nonmarket strategy, as well as providing meaningful understanding of its perceived organizational performance and competitiveness benefits. The study illuminates a surprising observation, where the natural expectation is that partnerships would lower cost of implementing an infrastructure-building nonmarket strategy. Contrary to this expectation the study shows that a partnering relationship increases cost suggesting antecedents that drive the direction of the relationship. Future research can focus on a single set of factors among strategy options, institutional factors, economic factors, as well as examine the antecedents on the relationship with cost of implementing nonmarket strategy.