How host country institutional environments influence the digital transformation objectives of multinational subsidiaries operating in emerging markets

Abstract

Digital transformation is about changing the way that businesses operate so that they remain competitive in the digital world. The challenge for multinational enterprises wanting to embark on a digital transformation journey is that they have subsidiary businesses operating in multiple locations. The organisation’s digital transformation strategy might conflict with the host country regulatory frameworks within which their subsidiaries have to operate. The challenge is perhaps greatest for subsidiaries operating in emerging markets where local inadequacies create domestic intuitional voids. A multi-site case study was used to compare the effects that host country institutional voids had on digital transformation and how multinational subsidiaries in six African countries overcame those effects in their respective markets. Data were collected from semi-structured interviews and archival records. The type and intensity of institutional voids present in the host countries were consistent in all but one case. Subsidiaries overcame the effects through a combination of relationship and capability-building processes. Political and economic factors had the most severe impact and required dedicated resources and responses. Findings had positive implications for host country policymakers from a local improvement perspective. Similarly, for multinational management teams in terms of the challenges and risks inherent to operations in emerging markets.