Exploring the impact of home- and host-market institutions on entry strategies utilised by South African small and medium enterprises when regionalising into the rest of Africa

Abstract

South African Small and Medium Enterprises who have pursued regionalisation activities have to contend with a myriad of home and host-market institutions in their regionalisation journeys. These institutions can either foster or push their regionalisaion given the host-market conditions, and influence the type of entry-mode strategy used. As a middle-income country, the South African institutional context is characterised by weak institutions, this is also the same for the Rest of Africa given most markets are economically underdeveloped. This research therefore seeks to examine impact of these home and host-market institutions on entry strategies used by South African SMEs to overcome these voids. The study reveals that the South African institutional environment fosters regionalisation through its more developed production and stable financial market conditions compared to the rest of the African region. It also pushes regionalisation due to the high market saturation. Home-market institutions that contribute to this are government and South African Multinational Enterprise who also have presence in the African region. The research employed qualitative, exploratory research methods and conducted ten semi-structured interviews with SME founders or senior individuals directly responsible for internationalisation. The SME businesses were in the food and beverage manufacturing, technology and diversified sectors. The research used non-probability sampling haphazard and snowballing method to reach the target sample size. All interviews were conducted online, and the recordings were then used to transcribe data for systematic thematic analysis of coding and theming using Atlas TI. Key research findings extend emerging research that suggests that SMEs in emerging markets will employ resource-heavy entry modes in their regionalisation strategy where risk and opportunity are high.