From outsider to insider : how direct selling multinational enterprises leverage social capital to internationalise

Abstract

Direct selling multinational enterprises (DSMNEs) have successfully managed to leverage insider networks to overcome the liability of outsidership when entering base of pyramid (BoP) markets (Dolan & Johnston-Louis, 2011). The purpose of this study is to gain an understanding of how DSMNEs leverage social capital to move from outsider to insider networks when internationalising within BoP markets in South Africa, specifically examining the influence of network structure relationships: network closure and structural holes to market entrance. The study adopts a social capital perspective to firm internationalisation. To address the purpose of the study, the exploration draws from the direct selling industry and international business literature. A descriptive phenomenological design was developed and data was gathered through conducting 10 in-depth semi-structured interviews. The results clarified the role of social structures in enabling independent direct sellers to create network relationships that facilitate the internationalisation process of DSMNEs. Furthermore, a deeper understanding was gained on how DSMNEs leverage social capital to enter BoP markets largely by converting the large number of people involved in the informal economy into suitable human capital. The transferability of the results could be supported by research within the context of other business sectors or developing sub-Saharan countries. The study has implications for international business globalisation strategies as it identifies BoP network specific knowledge to target network insidership. The study embraces an early attempt to encompass the interface of DSMNE internationalisation and Ubuntu/Botho social network structures. The study offers important theoretical understandings into the international business, direct selling firms and social capital literatures.