Foreign participation and internationalization intensity of African enterprises

The purpose of this paper is to establish the relationship between foreign participation in enterprises in Africa, their internationalization intensity and the associated moderating conditions.

The study utilized data from the World Bank enterprise surveys in 46 African countries across seven years. The hypothesized relationships are estimated using the Heckman two-stage pooled cross-sectional model to correct for selection bias.

The findings show that foreign participation in enterprises has a positive effect on internationalization intensity in Africa. While we observe this positive effect, we also found that there is a lot of heterogeneity that accompanies this effect based on enterprise size, financial performance and local market competition.

The study contributes to the internationalization literature by showing that foreign participation in local enterprises can have a positive effect on the internationalization propensities of these enterprises. It also shows that the main effect is heterogeneous as it is moderated by other enterprise and environmental factors.

Enterprises should recognize the positive effect that foreign participation in them can have on internationalization intensity. Managers of African enterprises need to look beyond the investments into enterprises that foreign owners offer and take advantage of their foreign market knowledge and legitimacy. Discrimination in local markets could be considered as a push factor to internationalize.

While the study is not the first to explore the relationship between foreign ownership and internationalizing behavior, it is one of the earliest to show that the relationship is heterogeneous, and it provides some key moderators.