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Institutions, Resources, and Organizational Effectiveness in Africa

April 2014
Academy of Management Perspectives 29(1):7-31

DOI:10.5465/amp.2012.0033

Authors:

Baniyelme D. Zoogah

McMaster University

Habte Woldu

The University of Texas at Dallas

While management research has made significant progress in globalizing its reach, African organizations have remained a missing link. We argue that Africa-focused management research may address the major problem of organizational effectiveness through work on the two major theoretical building blocks: institutions and resources. Building a model of organizational effectiveness in Africa, this article discusses the interactive processes within each of the two building blocks and the transformational mechanisms that link each theory and organizational effectiveness in the African context.

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SYMPOSIUM

INSTITUTIONS, RESOURCES, AND ORGANIZATIONAL

EFFECTIVENESS IN AFRICA

DAVID B. ZOOGAH

Morgan State University

MIKE W. PENG

University of Texas at Dallas

HABTE WOLDU

University of Texas at Dallas

While management research has made significant progress in globalizing its reach,

African organizations have remained a missing link. We argue that Africa-focused

management research may address the major problem of organizational effective-

ness through work on the two major theoretical building blocks: institutions and

resources. Building a model of organizational effectiveness in Africa, this article

discusses the interactive processes within each of the two building blocks and the

transformational mechanisms that link each theory and organizational effective-

ness in the African context.

Described as a “parochial dinosaur” by Boy-

acigiller and Adler (1991) more than 20 years ago,

management research has made significant prog-

ress in globalizing its reach and being more inclu-

sive of organizations in non-Western developing

economies in the last two decades (Hoskisson,

Eden, Lau, & Wright, 2000; Hoskisson, Wright, Fila-

totchev, & Peng, 2013; Wright, Filatotchev, Hos-

kisson, & Peng, 2005). While the geographic bias in

favor of covering Western developed economies is

being gradually reduced and the rest of the world—

such as Asia (Bruton & Lau, 2008; Carney, 2013;

Peng, 2007), Central and Eastern Europe (Meyer &

Peng, 2005; Woldu, Budhwar, & Parkes, 2006),

Latin America (Martinez & Kalliny, 2012; Vassolo,

De Castro, & Gomez-Mejia, 2011), and the Middle

East (Zahra, 2011)—is now increasingly featured in

management journals, one important part of the

world—Africa—has remained essentially off re-

searchers’ radar screen (Jackson, 2004).

This is unfortunate, considering that Africa is

home to more than one billion people, 54 countries,

and vibrant economies including those found in

Botswana, Ghana, Mauritius, Rwanda, and South

Africa (Hoskisson et al., 2013; Kehl, 2007; McKin-

sey Global Institute, 2010). In addition to its 4.7%

annual average real gross domestic product (GDP)

growth, Africa’s spending power has been increas-

ing, as indicated by the $860 billion Africans spent

on goods and services in 2008, which was 35%

more than Indians spent and more than the $821

billion that Russians spent (McKinsey Global Insti-

tute, 2010). Opportunities are plentiful in sectors

such as agriculture, retail, banking, infrastructure,

natural resources, and telecommunications (Chi-

ronga, Leke, Lund, & Van Wamelen, 2011; Econo-

mist, 2005, 2011, 2013). Economist Group (2013)

predicted that seven of the world’s top 20 fastest

growing economies in the next five years will be in

Africa. As the Academy of Management Global

We thank Tim Devinney (editor) and reviewers for

excellent guidance. Earlier versions were presented at

the 2014 Africa Academy of Management Biennial Meet-

ing in Gaborone, Botswana, and the Earl Graves School of

Business and Management Brown Bag Series. This re-

search was supported in part by the Jindal Chair at the

University of Texas at Dallas.

娀The Academy of Management Perspectives

2015, Vol. 29, No. 1, 7–31.

http://dx.doi.org/10.5465/amp.2012.0033

written permission. Users may print, download, or email articles for individual use only.

Conference call for papers indicates, “marked by

fast growth, limited growth, or no growth at all,

Africa’s business, government, and civil sectors all

need world-class management.”

This motivation

inspired the Academy of Management to hold its

first Global Conference in Africa in January 2013

with the purpose of bringing “Africa’s unique ca-

pabilities and needs to the attention of the world’s

organization and management scholars, and at the

same time to provide an opportunity for interested

colleagues to collaborate and work on the many

interesting theoretical and practice problems pre-

sented in Africa.”

Focusing on theoretical and practical problems

in Africa is particularly important considering that

“firms in developing countries...tend to be poorly

managed” (Bloom, Genakos, Sadun, & Van Reenen,

2012, p. 12). One outcome of poor management is a

low level of organizational effectiveness. Briefly,

organizational effectiveness is a multidimensional

construct that encompasses proximal outcomes

(e.g., performance) and distal outcomes (e.g., com-

petitive advantage) (Cameron & Whetten, 1983).

Even though there are hundreds of thousands of

enterprises in the formal and informal economies

of Africa (Bruton, Ireland, & Ketchen, 2012; Bruton,

Peng, Ahlstrom, Stan, & Xu, 2015; Chironga et al.,

2011; Godfrey, 2011), we know little about the driv-

ers of their effectiveness.

Broadly organized into three groups (featuring

sociocultural, historical, and psychological mod-

els), the few studies that have examined organiza-

tional effectiveness in Africa show no consistent

frameworks. First, sociocultural models attribute

the ineffectiveness of African organizations to the

cultural beliefs, values, attitudes, and behaviors

that condition African managers and workers to

poor attitudes to work, low motivation, lack of ini-

tiative, excessive religiosity, and low productivity

(Eze, 1995; Onyemelukwe, 1983; Osuji, 1984; Rob-

erts, 1990). Second, historical models argue that the

practices of colonial enterprises were not oriented

toward enhancing effectiveness of African organi-

zations (Blunt & Jones, 1992; Decker, 2010; Dia,

1996; Nyambegera, 2002). The negative reactions of

workers (e.g., shirking and minimizing work output)

to the imposition of a European system of work that

deprived them of their independence during colonial

times exacerbated these negative reactions during the

postcolonial era (Ugwuegbu, 2001). Third, psycho-

logical models suggest that insufficient rewards and

poor leadership undermine the performance of

workers and effectiveness of African organizations

(Munene, 1991; Roberts, 1990; Seriki, Martin, & Par-

boteeah, 2010; Ugwuegbu, 2001).

These studies are significant, but they princi-

pally focus on main effects and do not consider the

dynamic influences of the African context. Institu-

tional factors such as regulations and markets, for

example, interact not only with each other, but also

with resources and capabilities at industry and firm

levels to influence organizational effectiveness

(Collier & Gunning, 1999; Hyden, 2006; Peng,

2014). In sum, previous models seem inadequate to

explain the complex and dynamic attributes of the

African environment. As such, the management lit-

erature currently lacks a dynamic and integrative

view of organizational effectiveness that is height-

ened by (1) the high uncertainty of the African

context (Munene, 1991; Ugwuegbu, 2001; Zoogah &

Nkomo, 2012); (2) the increasing influx of diverse

private, public, and nongovernmental (third-sector)

organizations (Economist, 2011; McKinsey Global

Institute, 2010);

(3) the interconnectedness of the

formal and informal economies (Godfrey, 2011);

and (4) a growing number of African countries tran-

sitioning from socialism to capitalism (McKinsey

Global Institute, 2010, 2012).

A dynamic model of organizational effectiveness

that is based on the African context, institutions,

and resources represents an emic approach that

extends and elaborates on existing theories. Insti-

tutions and resources are two major frameworks

in the management literature (Meyer, Estrin,

Bhaumik, & Peng, 2009; Peng, 2014) and have been

viewed as essential to the development of Africa, as

evidenced by the four tracks of the Academy of

See http://meeting.aomonline.org/international/

southafrica.

See http://meeting.aomonline.org/international/

southafrica.

We adopt McGahan’s (2012) definition of organiza-

tions, which includes public-sector organizations, edu-

cational institutions, multilateral agencies, health organ-

izations, nongovernmental organizations (NGOs), large

corporations, small firms, and microenterprises. Collec-

tively, they comprise private, public, and third sectors

and range from microenterprises in the informal sector to

small and medium-size enterprises to large-scale enter-

prises in the formal sector (Dia, 1996).

At the Academy of Management Africa Conference in

January 2013, out of more than 250 papers, about half

explicitly focused on the private, public, and third sectors.

8 FebruaryThe Academy of Management Perspectives

Management Africa conference in January 2013.

We therefore ask this question: How do the dynam-

ics of the African context influence the effective-

ness of organizations? To begin answering what we

believe to be an important question for the manage-

ment field in general and Africa management in

particular, we propose a dynamic framework. The

development of this model stems from our exten-

sive review of the literature in management, mar-

keting, and economics, consisting of 568 articles

published in the past five decades (1960 through

2011) (see appendix for details). Our model is not

only consistent with the interactive thesis in polit-

ical science (Hyden, 2006), it also integrates two

major drivers of organizational effectiveness in Af-

rica (Zoogah, 2008). Specifically, we propose that

the Africa context influences the effectiveness of

organizations through two theoretical building

blocks: institutions and resources (see Figure 1,

panel a). Mathematically, this can be expressed:

OE ⫽f[AC

⫻(IE

⫹RC

)] (1)

where OE refers to organizational effectiveness, AC

refers to African context, IE refers to institutional

environment, and RC refers to resources and capa-

bilities, nrefers to national, drefers to industry,

and orefers to organization.

As shown in Figure 1 (panel b), the traditional

and modern contexts influence outcomes of organ-

izations through interactive processes of formal

and informal institutions at national and industry

levels on one hand, and through interactive pro-

cesses of formal and informal resources and capa-

bilities at industry and firm levels on the other

hand. Beneficence and configuration mechanisms

transform institutional and resource dynamics, re-

spectively, to organizational outcomes.

EFFECTIVENESS OF AFRICAN

ORGANIZATIONS

The purpose of Africa management is to enhance

organizational effectiveness (Dia, 1996; Zoogah &

Nkomo, 2012). Management scholars generally

agree that organizational effectiveness is multidi-

mensional and is manifested in various perspec-

tives (Cameron & Whetten, 1983). Given the inter-

connectedness of formal and informal economies,

the variety of African economic systems, and the

diversity of the African management thought sys-

tem (Ahiauzu, 1986), we classify the outcomes in

the literature based on the contextual (internal and

external) and temporal (short term and long term)

dimensions of organizational effectiveness (see Fig-

ure 2). Some outcomes are internal (e.g., profitabil-

ity); others are external (e.g., customer satisfaction).

Some outcomes may be short term (e.g., sales) and

others long term (e.g., societal transformation). Col-

lectively, they depend on the African context.

THE AFRICAN CONTEXT

We argue that the African context influences the

effectiveness of African organizations in a way that

is different from other (particularly Western) con-

texts (see Michalopoulos and Papaioannou and Ri-

vera-Santos, Holt, Littlewood, and Kolk, this issue).

Context is key because it links “observations to a

set of relevant facts, events, or points of view that

make possible research and theory that form part of

a larger whole” (Rousseau & Fried, 2001, p. 1). Two

differentiating features of contexts are nominality

and theoreticality (see Table 1). While nominality

focuses on tangible characteristics such as geo-

graphic location, climatic attributes, and physical

distance, theoreticality focuses on the relational

meanings that are inferred from a context (Johns,

2006). Nominally, Africa is characterized by mod-

ern and traditional contexts (Collier, 2007; Collier

& Gunning, 1999). The duality of context is in line

with the dual authority and mixed governance

view of African states, where national and ethnic

institutions and policies coexist, sometimes in har-

mony and other times in conflict (Herbst, 2000;

Michalopoulos & Papaioannou, 2015; Sklar, 1993).

Mamdani (1996) noted that since colonization, Africa

has had a modern system originating in the colonial

state and a customary one rooted at the ethnic level, a

view buttressed by the dual economy paradigm of

Lewis (1954), who argued that developing countries

are characterized by an advanced sector (usually as-

sociated with manufacturing and urbanization) and a

backward sector (typically associated with commu-

nal property rights in agriculture).

The modern context is mostly associated with

urban locations. Approximately 395 million Afri-

cans (almost 40%) lived in urban areas in 2009, and

The four tracks were (1) Navigating Institutions:

Business, Government, and Civil Society; (2) Emerging

Market Firms and MNCs: Characteristics and Global As-

pirations; (3) The Base of the Pyramid: Emerging Market

Consumers, Workers, and Managers; and (4) Cultural Di-

versity and Transformational Societies.

2015 9Zoogah, Peng, and Woldu

FIGURE 1

(A) Brief and (B) Expanded Conceptual Models of Institutional and Resource Dynamics Behind

Organizational Effectiveness in Africa

10 FebruaryThe Academy of Management Perspectives

FIGURE 2

Typology of Organizational Effectiveness Indicators

Note: The indicators are a combination of past, present, and future research outcomes of local and foreign organizations in public,

private, and non-for-profit sectors. They are compiled from previous sources including Acquaah, 2007; Beugre and Offodile; 2001; Blunt

& Jones, 1992; Brennan & Fickett, 2011; Collier & Gunning, 1999; Dia, 1996; Eze, 1995; Goedhuys & Sleuwaegen, 2010; Human, 1996;

Jackson, 2004; Kamoche & Harvey, 2006; King, 1986; Mbaku, 2004; McCourt & Ramgutty-Wong, 2003; Munene, 1991; Newenham-Kahindi,

2009; Nyambegera, 2002; Ofori-Dankwah & Julian, in press; Oloko, 1977; Onyemelukwe, 1983; Osuji, 1984; Roberts, 1990; Seriki, Martin,

& Parboteeah, 2010; Ugwuegbu, 2001; Zoogah, 2009; and Zoogah & Abbey, 2010.

TABLE 1

Contextual Characteristics of Africa

Characteristics

Nominal Context Modern Traditional

Sector Urban Rural

Proportion 30%–40% 60%–70%

Systems

Economic High industrial activity Agrarian and subsistence

Capital Economic Social

Markets Commercial Autarky

Credit and finance Banking institutions Kinship and interpersonal networks

Technology Global Local

Property rights Private and tradable Communal and intergenerational transfers

Education Literate Illiterate

Political Republics Chieftaincy

Legal Courts Tribal councils

Culture Individualistic and national identity Collectivistic and tribal identity

Social Nation Tribe and family

Sources: Content analysis of management, marketing, and economics literatures (Anyansi-Archibong, 2001; Collier, 2007; Collier &

Gunning, 1999; Collier & Pattillo, 1998; Jackson, 2004; Odedokun, 1996; Oshikoya, 1994; Pattillo, 1998; Sachs & Warner, 1995, 1997; Sahn,

1994; Ugwuegbu, 2001; Mbaku, 2004; van de Walle, Ball, & Ramachandran, 2003; Zoogah, 2008, 2012).

2015 11Zoogah, Peng, and Woldu

the ratio is likely to increase to 60% by 2050 (UN

Habitat, 2010). As shown in Table 1, the systems of

modern or urban contexts differ from those of tradi-

tional or rural contexts. For example, economic sys-

tems in the urban areas focus more on industrial or

manufacturing activities (Collier & Gunning, 1999;

Mbaku, 2004). Culturally, urban contexts are charac-

terized by relative openness and individualistic ten-

dencies. Banks provide finance and credit to many

organizations in urban areas (Collier, 2007). In sum,

the modern context is represented by the African

metropolitan center, which has features that are rela-

tively similar to the Western context.

In contrast, the traditional context is represented

by rural areas with features that differ drastically

from the Western context. The rural context is char-

acterized by chieftaincy and councils of elders, an

agrarian form of living, and lineage-based (rather

than property rights-based) inheritance. Such areas

have autarkic markets, high volatility, and ethnic

(and in some cases tribal) identities (Michalopou-

los & Papaioannou, 2015). Social institutions re-

volve around the family and communal activities.

Credit or funding tends to depend on interpersonal

trust. Learning is social rather than scientific, and

the human capital base is low because of the high

illiteracy rate. In addition, the traditional practices

of collectivism, shared values, and disproportion-

ate interdependence are extensive in rural Africa.

Of course, a great deal of more informal, traditional

practices exist in urban areas, and some flavors of

more formal, modern practices can be found in

pockets of rural areas.

Relative to other contexts such as Asia and Latin

America, the African context also represents ex-

tremes (Dia, 1996; Michalopoulos & Papaioannou,

2015). First, the dual context suggests that eco-

nomic activities are influenced differentially due to

different institutional, psychological, and sociocul-

tural systems. Second, the level of environmental

uncertainty, unpredictability, and exogenous influ-

ences in Africa seems unparalleled and higher than

that of other regions (Beugré & Offodile, 2001; Col-

lier, 2007; Collier & Gunning, 1999; Dia, 1996;

Hyden, 2006; Mbaku, 2004; Ugwuegbu, 2001).

Economists, for example, argue that despite re-

peated efforts they have been unable to move the

“development needle” in Africa (Collier, 2007; Dia,

1996). Political scientists also contend that the con-

flicts (and other traps) observed in Africa arise from

the strong ethnic identity (Michalopoulos & Papa-

ioannou, 2015) reinforced during the colonial era

(Mamdani, 1996), magnified by relative economic

deprivation (Robinson, 2001).

Thus Africa’s seeming unresponsiveness to exog-

enous influence is a product of historical and tra-

ditional experiences, which suggests that the Afri-

can context is a configuration or bundle of

exogenous and endogenous stimuli that interac-

tively influence management of organizations. Un-

like the West, which tends to be individualistic, the

colonial influence on Africa has resulted in cul-

tural dexterity that involves internalized alterna-

tions between collectivistic and individualistic ori-

entations. The mobility of people between urban

and rural areas tends to engender dual cultural

identity. These configurations shape the meanings,

underlying behaviors, and attitudes of employees,

groups, and organizations (Ugwuegbu, 2001). As

Rousseau and Fried (2001, p. 4) noted, interactions

or dynamic patterns “sometimes yield a more in-

terpretable and theoretically interesting pattern

than any of the factors would show in isolation.”

Overall, the interactive dynamics not only differen-

tiate Africa from the West, where linear outcomes

are generally expected, but also provide an oppor-

tunity for interesting nonlinear effects. Outcomes of

organizations tend to be dependent on interaction

patterns (Awedoba, 2005; Mbiti, 1999). Without dis-

missing the direct effects, we believe the influence is

through the mediating dynamics of exogenous and

endogenous factors—primarily through the two the-

oretical building blocks: institutional environment on

the one hand and resources and capabilities on the

other (see Figure 1a).

In the next section we argue that institutional

theories will be especially insightful for Africa re-

search, and following that, we illustrate how formal

and informal resources and capabilities influence

organizational effectiveness.

INSTITUTIONAL ENVIRONMENT

The effectiveness of African organizations de-

pends on the institutional environment in which

they operate. Since the 1980s, institutional theories

have become a major perspective in the social sci-

ences (Scott, 1995) and have emerged as a leading

movement in management research (Dunning &

Lundan, 2008; Peng, Sun, Pinkham, & Chen,

2009).

The core claim of institutional theories is

A review of the papers presented at the January 2013

Academy of Management Africa Conference shows that

approximately 20% used institutional theories.

12 FebruaryThe Academy of Management Perspectives

that “actors pursue their interests within institu-

tional constraints” (Ingram & Silverman, 2002, p.

1). Given the radical contrast between the institu-

tional frameworks in Africa and those in developed

economies (Fafchamps, 2004; Kamoche & Harvey,

2006), we argue that institutional theories will be

especially insightful for Africa research.

Popularized as the “rules of the game,” institu-

tions are the “the humanly devised constraints that

structure human interaction” (North, 1990, p. 3).

Institutional environments are “characterized by

the elaboration of rules and requirements to which

individual organizations must conform in order to

receive legitimacy and support” (Scott, 1995, p.

132). Because institutional environments are exog-

enous to organizations, they usually comprise na-

tional and industry components (Carson, Devin-

ney, Dowling, & John, 1999; Oliver, 1991). Some

scholars focus on the cultural, political, economic,

and social dimensions of national and industry in-

stitutions (Oliver, 1991), while others focus on

formal and informal dimensions of institutions

(North, 1990). In this article we integrate both. Even

though some Western theories, particularly those at

the micro level (psychology, organizational behav-

ior, human resources, and industrial organizational

psychology), emerged from studies of hospitals,

schools, the military, and even street corners, most

modern management and organization theories at

the macro level have emerged from a manufactur-

ing setting, with its own modes of operation. How-

ever, manufacturing, as a relatively formal activity,

is young in Africa, “largely a creation of the past 50

years” (Collier & Gunning, 1999, p. 76). Much of the

African workforce (between 65% and 75%) is in

agriculture, whose practices are more informal

(Tiffen, 2003). The formal and informal dimensions

emanate from the macro-level aspects of society,

including the polity, the judicial system, cultural

norms, and kinship patterns (Carson et al., 1999).

Each is discussed below.

Formal Institutions

Studies of African institutional environments

have focused on the formal economic, political,

and sociocultural institutional structures that are

dominant in the modern sector (see Table 2). For-

mal economic institutions such as labor markets

and banking institutions regulate and incentivize

transactions, investments, and exchanges. Gener-

ally, they are sophisticated, legalized, monetized,

and primarily in urban areas (Collier, 2007; Kagwe,

1999). Although weak relative to Western institu-

tions, they nonetheless influence economic activi-

ties including investments, production, and labor

acquisition.

Political institutions provide regulative mecha-

nisms such as legislation and democratic systems,

although they often “promote bureaucratic corrup-

tion, provide perverse market incentives, and as a

result distort resource allocation” (Mbaku, 2004, p.

151). Democratic systems in which the rule of law

dominates establish property rights through which

organizations acquire, use, and dispose of property.

Legislations also affect not only internal operations

and services (e.g., equal pay for women and men), but

also external activities (e.g., antitrust). In the 1980s,

Ghana, for example, nationalized foreign firms be-

cause of antitrust concerns (Ahiakpor, 1985).

Sociocultural institutions comprise social and cul-

tural norms prevalent in a society (Rivera-Santos,

Holt, Littlewood, & Kolk, 2015). They regulate the

social activities of individuals and groups. Culture—

TABLE 2

Institutional Environments and Resources and Capabilities of Firms

Dimension Formal Informal Level

Institutional environment

Economic Markets and policies Barter N

Political and legal Democratic system; rule of law; private property Chieftaincy, rule of tribe; communal property N

Financial Banking and stock exchanges Interpersonal lending, susu N/I

Sociocultural Competence and festivals Tribalism and nepotism N/I

Resources and capabilities

Human Patents and inventions Knowledge I/O

Financial Reserves and securities Potential investors, transfers O

Technology Copyrights and trade secrets Ingenuity and “brain gain” I/O

Management capabilities* Leadership and structure Relationships and planning O

Note: N, I, and O refer to national, industry, and organization, respectively.

*Includes marketing and production capabilities, which are essential for not only controlling communication and collaboration systems

but also operations and plans of organizations.

2015 13Zoogah, Peng, and Woldu

defined as the shared beliefs, values, and behavioral

norms of a group (Hofstede, 2001)—has tribal and

national components. With more than 1,000 ethnic

groups, Africa has more diverse groups than any

other continent (Awedoba, 2005; Collier, 2007). Eth-

nic beliefs about work derive from traditional or tribal

practices and therefore differ from European work

structures introduced through colonialism (Mbiti,

1999; Ugwuegbu, 2001). Formal sociocultural institu-

tions such as days of work and non-work (i.e., holi-

days and festivals) also affect organizational produc-

tivity through absenteeism and turnover (Dia, 1996;

Ugwuegbu, 2001).

In sum, formal institutions tend to dominate the

modern context and influence industrial activities

in urban centers (e.g., Accra, Cairo, Johannesburg,

Lagos, Nairobi) through their regulatory function.

However, given that the formal economy is a small

proportion of the overall economy (Godfrey, 2011),

the effects of formal institutions on organizations

may be limited, thus necessitating that we pay at-

tention to informal institutions.

Informal Institutions

Informal institutions are informal constraints

such as conventions, norms, and codes of behavior

(North, 1990), which especially influence rural ac-

tivities in Africa (Hyden, 2006). Generally, infor-

mal institutional actors share a common set of ex-

pectations and rely on simple norms of reciprocity

as self-enforcement. Exchanges are non-contrac-

tual, idiosyncratic, and undefined in terms of time,

implementation, or confidentiality (Hyden, 2006).

Economic informal institutions center on the infor-

mal economy, which refers to an “economic activ-

ity that [is] conducted by unregistered firms or by

registered firms but hidden from taxation” (Castells

& Portes, 1989, p. 12). Such “off the books” eco-

nomic activity is often characterized by either il-

licit practices (products or processes) or illicit ex-

changes (Venkatesh, 2006). The informal economy

plays a significant role in Africa (Bruton et al.,

2012; Godfrey, 2011; Khavul, Bruton, & Wood,

2009). For example, in rural areas, barter systems

typify informal economic institutions (Ayitteh,

1988; Nel & Binns, 2000).

Informal political institutions that affect indus-

trial activities include rule of tribes (or traditional

rule), clientelism (distributing rewards to clients)

(Hyden, 2006), and corruption (Kpundeh, 2004;

Zhou & Peng, 2012). In Ghana, for example, the

chief and his council constitute the law courts in

the community, and the paramount chief acts as the

chief justice of the traditional court. Chiefs perform

symbolic, administrative, and judicial functions

and have “helped improve the legitimacy and en-

forceability of rule of law and property rights” (Dia,

1996, p. 106). In other words, chiefs wield a great

influence in cultural, economic, and social ex-

changes (Acquaah, 2007). In addition to control

over land acquisition and use, they indirectly

influence organizational functioning through man-

datory cultural practices (Michalopoulos & Papaio-

annou, 2015). Formal organizations are often ex-

pected to honor festivals and other traditional

celebrations, which can affect productivity. Hyden

(2006), for example, argued that “Africa is the best

starting point for exploring the role of informal

institutions,” which derive from a social logic

called “the economy of affection” (p. 78). Through

such institutions firms are able to obtain contracts,

acquire resources, and accomplish goals (Chironga

et al., 2011), even though corruption provides per-

verse market incentives that distort resource allo-

cation. Firms in Africa often have to deal with

unfriendly legislative requirements (Kiggundu,

1989; Mbaku, 2004). These legislative requirements

are sometimes unresponsive to contingencies (e.g.,

establishment of business) or provide insufficient

protection for business (Dia, 1996; Mbaku, 2004).

To avoid the harsh effects of unfriendly legislation,

some companies often bribe enforcers, a cost that

affects organizational performance (Zhou & Peng,

2012). According to Transparency International’s

Corruption Perceptions Index,

only a few African

countries have low corruption scores (i.e., score

high on the transparency scale).

Sociocultural informal institutions include cul-

tural rules of the game that create shared expecta-

tions regarding patronage, which is commonly

termed tribalism and nepotism. Tribalism—the ten-

dency of individuals to favor other individuals

from their tribe with regard to work practices such

as hiring, promotion, compensation, and firing

(Beugré & Offodile, 2001)—contributes to organiza-

tional ineffectiveness (Ugwuegbu, 2001). For

example, employees of La Compagnie Ivoirienne

d’Electricité in the Ivory Coast report tribalism as

one of the paternalistic factors affecting firm oper-

ations and performance (World Bank, 1994). Nep-

otism is defined as networks of support among

groups connected by blood, kin, community, or

See http://www.transparency.org/cpi2014.

14 FebruaryThe Academy of Management Perspectives

religion (Hyden, 2006). In addition to accounting

for a significant proportion of hiring, training and

development, promotion, retention, and firing,

tribalism and nepotism function as control, pro-

tection, and security mechanisms for the patrons

(Beugré & Offodile, 2001). Although tribalism

and nepotism sometimes undermine collective

performance, efficiency, and productivity, they

tend to be used extensively in rural areas because

of patrimonial demands (Michalopoulos & Papa-

ioannou, 2013).

One interesting sociocultural institution is

ubuntu, which literally means “I am who I am

through others.” It originates from the Zulu lan-

guage in South Africa and is now widely appreci-

ated throughout the continent. Essentially a strong

form of collectivism, ubuntu is a pattern of behav-

iors that helps integrate members of a society into

strong, cohesive in-groups (Mbigi & Maree, 1995).

Members share resources and support each other in

exchange for unquestioning loyalty; demonstrate

caring, respect, and compassion that ensure a high-

quality community life; create networks of social

obligations that link managers to extended families,

villages, and ethnic groups; and set a foundation

to relationships—personalized and horizontal—

within organizations that can contribute to compet-

itive advantage (Mangaliso, 2001).

The heavy use of informal institutions suggests

that they complement (if not compensate for) for-

mal institutions particularly in rural areas. Along

with formal institutions, informal institutions not

only define the institutional environment and

cover both urban and rural contexts of Africa, they

also influence organizational effectiveness in both

the formal and informal economies. While institu-

tions constitute one set of major determinants of

organizational effectiveness, another set is firm re-

sources and capabilities.

RESOURCES AND CAPABILITIES

The role of resources and capabilities as drivers

of organizational effectiveness is a keystone in re-

source-based theories (Barney, 2001). Given that

exogenous factors are critical, we also integrate in-

dustry resources as complements (see Figure 1,

panel b). Overall, the extent to which organizations

combine industry-specific and firm-specific re-

sources can influence their effectiveness in formal

and informal sectors.

Formal Firm-Specific Resources and Capabilities

From a resource-based view, organizations

achieve sustained competitive advantage through

firm-specific resources and capabilities that are

valuable, rare, hard to imitate, and organizationally

embedded (VRIO) (Barney, 2001). While resource-

based research focusing on Africa has been sparse,

it is emerging and holds great potential (Zoogah,

2008). As shown in Table 3, we believe four major

types of resources and capabilities can influence

organizational effectiveness through their value-

creating potential.

Within the formal economy, resources range

from human resources to management capabilities

(see Table 2, above). The profusion of relatively

cheap labor in Africa suggests that manufacturing,

service, and agricultural organizations can achieve

their objectives efficiently (Jackson, 2004; Moss,

2007). However, superior human resources associ-

ated with advanced educational systems unfortu-

nately are lacking in Africa because of the low level

of educational systems and the lack of training

mechanisms (McKinsey Global Institute, 2012).

Oyelaran-Oyeyinka and Barclay (2004) suggested

that the colonial origin of skewed schooling enroll-

ment is at variance with the industrialization ob-

jective of modern African economies.

Financial resources in the form of cash reserves

and securities are essential for the functioning of

organizations, particularly those in the formal sec-

TABLE 3

Summary of Effects of Institutional Environments and

Resources and Capabilities

Organizational Effectiveness

Short Term Long Term

Internal External Internal External

Context

Modern x x x

Traditional x x x

Institutional Environment

Economic x x x

Political and legal x x

Financial x x

Sociocultural x x x

Resources and Capabilities

Human x x x x

Financial x x

Technology x x x x

Management x x

Interactive dynamics

National level x x x x

Organizational level x x x x

Cross level x x x x

Facilitative and inhibitory effects of determinants.

2015 15Zoogah, Peng, and Woldu

tor. Consequently, African economies are establish-

ing mechanisms (e.g., stock exchanges) that enable

organizations to develop capitalization and finan-

cial securitization mechanisms, albeit slowly

(Ofori-Dankwa & Julian, 2013; Onyuma, 2006). As

we discussed earlier, firms in the formal sector

often depend on banks for funding and use risk-

management mechanisms such as hedging and

cash reservation as well as collateralization and

capitalization devices such as the stock market

(Dia, 1996). However, due to mismanagement and

underdevelopment of stock markets, many firms

are neither able to build cash reserves nor use se-

curitization effectively (Dia, 1996; Ofori-Dankwa &

Julian, in press). Formal financial resources alone

therefore are unlikely to enable organizations in the

formal sector to be effective.

Appropriate technological resources can supple-

ment financial resources. Technological resources

are crucial for organizations in the formal sector. In

developed economies, exemplified by copyrights

and patented mechanisms, formal technologies

manifest through highly developed technical pro-

cesses, systems, and mechanisms of manufacturing

organizations (Marsh & Mannari, 1981). Unfortu-

nately, such technologies are limited or sparse in

Africa because of the low level of industrialization,

the underdevelopment of mechanisms to support

such technologies, and the high cost of establish-

ing, maintaining, and utilizing them. Organizations

therefore have to supplement or substitute such

resources with management capabilities.

Management capabilities are defined as the com-

plex system of decision, control, and managerial

rights imposed on organizational exchanges consis-

tent with strategic objectives (Bruton et al., 2012).

Capabilities in the form of executive or managerial

leadership and structures affect organizational out-

comes. Dia (1996) identified leadership behaviors

of entrepreneurs that are specific to Africa in that

they engender cultural characteristics such as

“powerful presence commanding reverence and

devotion; benevolence, sociability, and group soli-

darity; and family sacrifice, generosity, and family

responsibility” (Dia, 1996, p. 161). Such capabili-

ties enable the transformation of entrepreneurs’

companies from small and mainly informal to large

and formal (Dia, 1996). The structures they estab-

lish tend to be less hierarchical and decentralized,

which is consistent with the consensus decision-

making style of councils of elders in rural contexts.

Sadly, there is a shortfall of not only management

capabilities but also human, financial, and techno-

logical resources in the formal sector (Ugwuegbu,

2001). The shortfall limits the effectiveness of Af-

rican organizations, and necessitates resources

from the informal sector.

Informal Firm-Specific Resources and

Capabilities

African firms cannot compete on formal re-

sources alone. Firms have to supplement them with

informal resources. One informal (human) resource

that can be harnessed for competitive advantage is

indigenous knowledge. Dia (1996) profiled success-

ful entrepreneurs with no formal education who

leveraged indigenous knowledge to build large

companies that not only operated in multiple Afri-

can countries but also gained competitive advan-

tage over foreign rivals. Another informal resource

is informal financing. Organizations in Africa, par-

ticularly entrepreneurial, small, and medium ones,

tend to lack financial resources because formal fi-

nancial institutions have a jaundiced attitude to-

ward the rural and informal sector and therefore

do not provide financial backing for investments

(Dia, 1996). As a result, such organizations use

traditional credit or trust systems such as the infor-

mal savings scheme (susu in English or tontine in

French) and remittance transfers from overseas

(Dia, 1996). Some entrepreneurs rely on personal

savings and reinvestment, while others use credit-

worthiness and transfers to grow their businesses.

For larger organizations in the formal sector,

growth often depends largely on potential foreign

investors.

Informal or traditional technologies related to ag-

riculture and services manifest through ingenuity.

Ingenuity is high in Africa, particularly in the in-

formal sector (Zoogah, 2012). It enables subsistence

and growth of entrepreneurial endeavors. For ex-

ample, through ingenuity, Amadou Diallo, a Sene-

galese entrepreneur, built a bird export business

that diversified to fish processing, maritime trans-

port, and agroindustry (Dia, 1996). He combined

ingenuity with unique trade secrets in birding, fish

processing, and agroindustry to transform his or-

ganization from a single unit to a multidivisional

structure—Diallo Pithie—that spans several Afri-

can countries.

Relationship building, experiential learning, and

planning capabilities are also informal resources

that facilitate transformation of organizations, par-

ticularly micro enterprises (Dia, 1996; Rivera-San-

tos et al., 2015). Planning capabilities seem rare in

16 FebruaryThe Academy of Management Perspectives

Africa because of the general lack of certainty and

predictability (Collier & Ginning, 1999). In Na-

mibia, South Africa, and Zimbabwe, for example,

small business owners who engage in elaborate and

proactive planning are found to outperform rivals

(Frese et al., 2007). The African small business

owners who engage in planning surveyed by Frese

and colleagues (2007) may be a very rare breed of

entrepreneurs who are goal-oriented, conscien-

tious, and meticulous, relative to their peers in

Africa (and the West) who simply “muddle

through” with no planning. From a resource-based

view, such attributes are clearly valuable, rare, and

hard to imitate by rivals (Barney, 2001).

In sum, informal resources and capabilities sup-

plement—and in some situations compensate or

substitute for the absence, insufficiency, or disutil-

ity of—formal resources. Similar to institutions,

both formal and informal resources and capabilities

influence organizational effectiveness. However, it

is their joint influence that seems more important

in the African context—a point to which we

turn next.

INTERACTIVE DYNAMICS

The African context is complex, uncertain, and

ambiguous (Chironga et al., 2011; Dia, 1996; Mbaku,

2004). Political conflicts can emerge unexpectedly,

and growing economies sometimes disintegrate sud-

denly. This unpredictability arises from the dynamics

of formal and informal systems (Collier, 2007; Collier

& Gunning, 1999; Hyden, 2006). The dynamism man-

ifests through interactions of institutions at the na-

tional level and resources and capabilities at the firm

level, and across the two levels.

Institutional Dynamics

The interconnectedness of exogenous institu-

tional processes in Africa makes it difficult to

isolate unique strands as determinants of organ-

izational effectiveness. As Scott (1995, p. 161)

observed, although “all organizations within a

given institutional field or sector are subject to

the effects of institutional processes within the

context, all do not experience them in the same

way or respond in the same manner.” Because we

can’t isolate what specifically affects organiza-

tional effectiveness, we need to look at a range of

institutional processes and their interactions.

First, sector interactions (i.e., factors within the

formal or informal sector) may occur. Formal eco-

nomic, political, social, and cultural institutions

may interactively determine organizational out-

comes. For example, formal monetary policy may

interact with market conditions to affect profitabil-

ity. Theoretically, one would expect that some or-

ganizations may experience high profit in good

market conditions and low profit in bad market

conditions. However, it is possible that other organ-

izations might experience low profit in good mar-

ket conditions and high profit in bad market con-

ditions. Indeed, the same organizations might

achieve high profits in bad economic conditions

and low profits in good economic conditions due to

institutional dynamics. It is also likely that ethnic

cultures that sometimes dominate national cultures

(Awedoba, 2005) may interact with the latter in the

workplace to affect productivity (Awedoba, 2005;

Gyekye, 2002).

Formal democratic management may join with

informal communal norms to affect organizational

growth. Legislative and political institutions may

also interact with labor market institutions to influ-

ence organizational efficiency. On one hand, for-

mal labor markets that affect manufacturing firms

tend to be characterized by relatively high wage

levels, with firms facing wages that rise as they

grow, which depresses profitability (Collier & Gun-

ning, 1999). By contrast, some urban contexts ex-

perience flexible labor markets that reduce the

pressure for wage increases. Overall, rigid labor

markets influence firm productivity differently

from flexible labor markets.

The second interactive process behind organiza-

tional effectiveness is the joint influence of formal

industry rules and formal political rules (e.g., elec-

tioneering or lobbying). Organizational effective-

ness in the informal economy may depend on the

joint influence of rule of law and rule of tribe.

When organizations focus on rule of law and ignore

rule of tribe, performance is likely to be low, par-

ticularly in rural areas where formal systems tend

to be subservient to informal systems (Dia, 1996).

As Acquaah (2007) found, informal resources such

as relations with chiefs have a positive influence on

firm performance.

The third process involves interaction of formal

and informal factors within the same dimension

(e.g., economic). Formal product markets may in-

teract with informal barter systems to affect organ-

izational growth. The different political (leader-

ship) structures of countries suggest that business

organizations may successfully influence politi-

cal agencies in some countries (e.g., Botswana)

2015 17Zoogah, Peng, and Woldu

but not in other countries (e.g., Zimbabwe). Fur-

ther, bribery and other graft mechanisms that

sometimes impede growth of a company can fa-

cilitate access to contracts and resources (Zhou &

Peng, 2012) in other countries. Nepotism facili-

tates acquisition of labor, but it also undermines

task and job performance. The economy of affec-

tion facilitates entrepreneurship, even though

it also burdens entrepreneurs and constrains

growth of business (Tokuori, 2006).

The fourth interactive process behind organiza-

tional effectiveness is related to interactions that in-

volve one or two formal dimensions and one or two

informal factors. In some countries, for example, the

inability of organizations to harness social capital (the

goodwill of workers and unions to accept lower

wages) may join with regulatory institutions that en-

force union rights to constrain efficiency because

firms cannot reduce or avoid wage shocks. This situ-

ation is aggravated when unions constitute the polit-

ical base of governments, as in South Africa. Another

cross-level dynamic involves interactions of national

and industry institutions. As Ofori-Dankwah and Ju-

lian (2013) found, such dynamics contribute to firm

performance.

In short, formal and informal exogenous institu-

tional dynamics often yield positive and negative out-

comes for organizations. Although institutional envi-

ronments facilitate productive activities through

uncertainty reduction (Peng et al., 2009), they also

“make it very difficult for the private sector to create

the wealth that these countries need” because of con-

formity demands (Mbaku, 2004, p. 151). These inter-

action processes suggest that institutional factors are

likely to dynamically affect organizational effective-

ness. Using institutional logic, Ofori-Dankwah and

Julian (in press) argued that the capital structure–

performance relationship is contingent on the extent

of national-level institutional underdevelopment.

Contrary to findings from developed economies, they

found that sector dynamism negatively moderates the

firm equity–performance relationship such that a

strongly positive effect of equity on performance in

stable sectors becomes slightly negative in highly dy-

namic ones.

Resources and Capability Dynamics

We argue that formal and informal resources and

capabilities interact in influencing organizational

effectiveness (see Figure 1, panel b). Our view is

supported by research in Africa that shows that

“factors embodied in firm-specific resources jointly

impact enterprise performance” and that “the inter-

action between microenterprise, sector, and market

factors helps explain enterprise performance” (Ma-

sakure, Henson, & Cranfield, 2009, p. 466). The

dimensional and cross-dimensional dynamics also

manifest in the case of resources and capabilities.

With regard to formality, there are several impor-

tant issues to consider. First, formal human re-

sources factors (e.g., educational level) may interact

with informal skill sets to affect firm performance.

Skills and training of employees in organizations

may also interact negatively with financial re-

sources to determine organizational viability. Su-

perior human resources represent increased labor

costs, which reduce profitability. In contrast, infe-

rior human resources have lower costs, which may

increase an organization’s profitability. While other

entrepreneurs use highly skilled employees, Kwa-

bena Danquah, a Ghanaian business magnate in

South Africa, has relied heavily on “moderately

skilled employees” (Rottok, 2013).

Second, formal technological resources may join

with formal financial resources to determine organ-

izational development. In many African countries,

mobile phones are a substitute for traditional

banks, enabling people in rural areas to use finan-

cial services—known as “mobile money” (Econo-

mist, 2012). For example, in Somalia, which lacks a

functioning government, 34% of adults use mobile

money (often to receive remittances from family

members abroad). However, in Kenya, which has a

vibrant government, mobile banking is a mecha-

nism to spread traditional banking to rural areas. A

staggering 68% of adults in Kenya use mobile

money (by far the highest rate in the world) in

combination with paper-based bank accounts

(Economist, 2012). The success of the entrepre-

neurs profiled by Dia (1996) was due to the inter-

action of human resources with social capital and

experiential learning. In an interesting extension of

Peng and Luo’s (2000) study of social capital in

China, Acquaah (2007) also reported that ties with

community leaders such as chiefs and elders—a

uniquely African phenomenon—have a more sig-

nificant impact on firm performance than other

forms of social capital. These findings represent a

first-of-a-kind contribution on the value of social

capital derived from ties with community leaders

by leveraging the African context. Clearly, social

capital is a relational resource that interacts with

financial and technological resources to influence

outcomes such as community engagement, sales,

and societal transformation.

18 FebruaryThe Academy of Management Perspectives

Third, cross-dimensional dynamics involving in-

teraction of human, financial, technological, and

social resources may influence effectiveness of Af-

rican organizations (Dia, 1996). The interaction of

financial and human assets may negatively affect

value creation, an effect that likely holds in manu-

facturing industries where processes require supe-

rior skills and knowledge. In service and agricul-

tural industries that rely on large numbers of cheap

laborers, productivity is likely to be higher because

of the availability of labor. Cheap labor enables

Ghana’s Lucky 1888 Mills, Ltd., a sustainable de-

velopment firm, to produce 350,000 pairs of trou-

sers a month for U.S. buyers, and Liberty and Jus-

tice to export tote bags from Liberia to New York’s

Godiva Chocolatier, Inc. (Hinshaw, 2012). How-

ever, expensive labor can stymie the growth of

some potentially successful businesses in South

Africa. Indeed, in an interview, Kwabena Adjare

Danquah, a prominent entrepreneur with holdings

in Ghana and South Africa, talked about the costs

of expensive labor, stating that “I don’t believe in

hiring ‘A’ students because brilliant graduates un-

derstand your business very quickly and keep de-

manding pay increases. After a while you are un-

able to meet their demands and they will head off

to a competitor with your ideas. But if you hire

average individuals they can work very hard with-

out you having to face high staff turnover. I was

actually invited to speak on this concept at the

Columbia Business School” (Rottok, 2013, p. 1).

Fourth, complex interactions involving multiple

dimensions are probable. Management capabilities

can interact with other capabilities to affect inter-

nal long-term outcomes. The survival or viability of

organizations depends not only on management

capabilities but also on their interaction with pro-

duction capabilities. If management capabilities are

high, traditional production practices are likely to

lead to low outcomes in manufacturing organiza-

tions in contrast to sophisticated production prac-

tices. However, in service (e.g., NGOs) or agricul-

tural (e.g., cocoa farming) industries, management

capabilities are likely to interact with production

capabilities in a way that enables traditional prac-

tices (thanks to indigenous knowledge)—rather

than sophisticated modern practices—to influence

organizational viability (Jackson, 2013). Organiza-

tion-specific capabilities (e.g., experiences) and re-

sources (e.g., technology) may also interact in in-

fluencing long-term external outcomes such as

societal transformation. Organizations that have ex-

perience in partnering with foreign firms can lever-

age that experience and their unique technologies

to transform a society. Rensburg, Veldsman, and

Lahde (2008, p. 1) reported on the “creation of

social enterprises to act as primary support mech-

anisms for infopreneurs (‘creative capitalists’) in

rural African communities.”

Finally, firm-specific resources may join with in-

dustry resources to affect organizational outcomes.

Best practices within industries lower transaction

costs and facilitate stronger learning (Perrin, Rol-

land, & Stanley, 2007). The extensive industry ex-

perience and proven track record of the manage-

ment team combined with macroeconomic and

intra-regional trends made Ecobank, a financial in-

stitution founded in 1988, the 15th largest bank in

West Africa in 2007 (Emerging Capital Partners,

2006). The competitive advantage was due to the

human capabilities of the company as well as the

strong productivity of natural-resource–rich West

African countries such as Ghana, Ivory Coast, and

Nigeria. Similarly, the resources of AngloGold

Ashanti, Limited, combined with mineral deposits

of South Africa, Ghana, and Congo, facilitated the

transformation of the company into not just the

largest gold producer in Africa, but also a leading

global producer.

Institutional and Resource Dynamics

So far our discussion has focused on the interac-

tion dynamics of institutional environments or re-

sources and capabilities. The institutional environ-

ment encompasses national and industry factors

that interact with resources and capabilities at the

firm and industry levels. From a multilevel per-

spective these interactions are cross-level (Kozlow-

ski & Klein, 2000); they have been observed in

conceptual research (Zoogah, 2008) and empirical

studies (Ofori-Dankwa & Julian, in press). They also

differ from the single-level interactions we dis-

cussed above. As Ofori-Dankwa and Julian (in

press, p. 1) recently found, “sector dynamism neg-

atively moderates the firm equity–performance re-

lationship: A strongly positive effect of equity on

performance in stable sectors becomes slightly neg-

ative in highly dynamic ones.”

We propose that unidimensional and multidi-

mensional dynamics of institutions and resources

and capabilities may affect organizational effective-

See http://www.ghanaweb.com/GhanaHomePage/

NewsArchive/artikel.php?ID⫽268292.

2015 19Zoogah, Peng, and Woldu

ness (see Michalopoulos & Papaioannou and Rive-

ra-Santos et al., this issue). For example, social

capital developed by managers can interact with

regulatory institutions to influence organizational

effectiveness. The ability of organizations to garner

social capital combines the goodwill of workers

and unions to accept lower wages with regulatory

institutions that enforce union rights to affect an

organization’s wage bill. This situation is eased,

however, when unions do not constitute the polit-

ical base of a government. Ethnic and national cul-

tures can also interact with organizational cultures

to influence productivity (Ugwuegbu, 2001). Orga-

nizational culture—the set of beliefs, values, and

norms that are unique to a firm—guides decision

making and employee behavior, amplifies commit-

ment, and provides justification for actions as well

as identity to members. Given that organizations in

modern Africa tend to adopt Western structures

and cultures (Dia, 1996), they are likely to have

hybrid cultures that combine ethnic, national, and

Western beliefs and values. By studying Western

multinationals in Africa as well as local firms in

both the formal and informal sectors, we can un-

derstand more fully the interactive effects of na-

tional and corporate culture on the viability of or-

ganizations. In addition, organizations in Africa

that combine firm-specific resources (e.g., borrow-

ing capacity) with national resources (e.g., land,

labor, and banks) are likely to be more productive

(Collier & Gunning, 1999). That may explain the

relatively high performance of organizations in

Ghana, Kenya, Nigeria, and South Africa (Collier,

2007). For example, the competitive advantage

AngloGold Ashanti enjoys as the leading producer

of gold in Africa is partly due to the joint effects of

resources and capabilities and institutional envi-

ronmental factors.

MEDIATING MECHANISMS

Beneficence

As shown in Figure 1 (panel b), one mechanism

mediating the interactive processes of exogenous

institutional environment is beneficence. Benefi-

cence refers to the degree to which environments

facilitate organizational effectiveness (Godfrey,

Hatch, & Hansen, 2008). It centers on environment

conditions—munificence or capacity-enhance-

ment, stability, and predictability (Dess & Beard,

1984)—that enable institutions to yield desired out-

comes. Studies of innovation and creativity suggest

that countries with beneficent business environ-

ments attract investors (Doh, Jones, Teegen, &

Mudambi, 2005; Greenberg, 1994). To the extent

that African countries are beneficent, they enable

institutional norms to effect desired organizational

outcomes (North, 1990). Beneficent environments

are not only devoid of shocks, uncertainties, and

chaos, but they also enable organizations to counter

transaction costs and institutional voids. For exam-

ple, even though Nigeria is generally regarded as

having corrupt national leaders, the vibrancy of the

market enables organizations to counter such neg-

ative practices. Beneficence enables organizations

to develop integration systems to amalgamate dis-

parate institutional processes into a harmonious

and coherent whole that facilitates effective func-

tioning (Hermann, 1963; Lawrence & Lorsch, 1967).

Organizations integrate interactive forces effec-

tively when they distill the competing pulls and

pushes of formal and informal institutional pres-

sures to reduce the impact of their effects. For ex-

ample, through environmental beneficence, Colora-

do-based Newmont (Ghana), Ltd., was able to

amalgamate the interaction of masculine beliefs

with feminine beliefs in both individualistic and

collectivistic environments in Ghana. In this organ-

ization, Talensis (who hold patrilineal cultural be-

liefs) interact socially with Akans (who have matri-

lineal beliefs) and American expatriates (who tend

to be individualists). Environmental beneficence is

therefore one vital mechanism. However, it is in-

sufficient; organizations will need to have the

proper configuration to become effective—a point

to which we turn next.

Configuration

The interactive processes of resources and ca-

pabilities influence organizational effectiveness

through configuration mechanisms (see panel b

of Figure 1, above). According to the resource-

based view, the ability of organizations to per-

form well depends on the configuration of re-

sources (Barney, 2001). Consistent with Miller

(1996), we argue that configuration—the degree

to which African organizations orchestrate firm-

specific resources and unique capabilities—is a

quality or property that varies among African

organizations. Configuration defines control and

reward mechanisms and ensures that the pro-

cesses of organizations are consistent with inter-

nal and external environments, flexible to facili-

tate adaptation, and complex (hard to be imitated

20 FebruaryThe Academy of Management Perspectives

by rivals). In other words, configuration serves as

a complex pattern or system that facilitates inim-

itable strategic capability (Barney, 2001).

Configuration enables certain organizations to

outperform others. For example, Cuervo-Cazurra

and Genc (2008), using data from 36 least-devel-

oped countries (LDCs) in Africa, reported that mul-

tinational enterprises (MNEs) from emerging

economies may have more effective and better or-

ganizational capabilities than MNEs from devel-

oped economies. While MNEs from emerging econ-

omies rarely appear among the largest or the most

powerful MNEs in the world, they are more preva-

lent among the largest foreign firms in African

LDCs. African LDCs represent a very challenging

environment with low GDP and high corruption

(Fisman & Svensson, 2007). Yet MNEs from emerg-

ing economies are more familiar with such chal-

lenging conditions, and have more appropriate

configurational capabilities for such environments

(Gu, 2009; Ofodile, 2009; Taylor, 2007). Certain

MNEs from developed economies have been active

in Africa, and some have been quite successful. But

in those base-of-pyramid (BoP) markets, they now

confront a new breed of MNEs from emerging econ-

omies that have formidable organizational capabil-

ities (Cuervo-Cazurra & Genc, 2008).

Furthermore, using international joint ventures

(IJVs) formed in Ghana, Acquaah (2009) found

that certain configurations are harder to imitate

and thus contribute to better firm performance.

Specifically, for Ghanaian firms, IJVs with part-

ners from emerging economies that implement a

cost leadership strategy outperform IJVs with

partners from developed economies that imple-

ment the same strategy. In contrast, IJVs with part-

ners from developed economies that compete on a

differentiation strategy outperform IJVs with partners

from emerging economies with the same strategy.

Clearly, certain configurations (or combination of re-

sources between Ghanaian and foreign firms) are

harder for rivals to imitate, thus contributing to stron-

ger firm performance. In short, proper configuration

adds value.

SUMMARY

The institutional environment of Africa appears

to be fertile ground to test and enhance existing

institutional theories, and holds the potential for

developing new ones as well (Zoogah, 2008). How

the disparate weak formal institutions are comple-

mented, supplanted, or integrated with informal

institutions to effectively influence internal and

external outcomes of African organizations can

help advance management research (Peng et al.,

2009). The interactive dynamics of resources and

capabilities within the industry and organization

can also enhance our understanding of organiza-

tional effectiveness (Ofori-Dankwa & Julian, in

press). Organizations that can configure their re-

sources in ways that enable them to overcome the

constraints of the complex and unpredictable envi-

ronment are likely to achieve short-term and long-

term outcomes. They are also likely to withstand

challenges from foreign rivals.

As summarized in Table 3, the major drivers—

context, institutional environment, and resources

and capabilities—may have different effects on or-

ganizational effectiveness. For example, research

on traditional context may show both internal and

external short-term as well as external long-term

outcomes. Studies of political and legal institutions

may also show internal short-term and external

long-term outcomes. Studies of management capa-

bilities are likely to find effects related to both

short-term and long-term outcomes. The interactive

dynamics may yield facilitative and inhibitory ef-

fects on internal and external outcomes in the short

term and long term at national and organizational

levels as well as across levels.

In sum, the dynamics of institutions and re-

sources involve interactions of national, indus-

try, and organizational factors. As two theoretical

building blocks, the institution-based view and

the resource-based view can therefore help us

understand the dynamics of African organiza-

tions. They offer explanations for the stunted

industrial growth and the contribution of man-

agement to Africa’s development.

DISCUSSION

Contributions

Overall, three contributions emerge. While Af-

rica has shown increasing economic dynamism and

the number of multinationals from Asia, Europe,

and North America active on the continent is in-

creasing (Chironga et al., 2011), studies of the driv-

ers of African organizations’ effectiveness are

limited and disparate. In this article, our first con-

tribution is to propose an integrative model of two

theoretical frameworks in which institutional envi-

ronments on one hand and resources and capabil-

ities on the other hand influence organizational

2015 21Zoogah, Peng, and Woldu

effectiveness. Management research on institutions

has benefited from researchers’ increasing attention

on emerging economies in Asia and Central and

Eastern Europe, whose contexts, rules, and norms

are different from those in the West (Meyer & Peng,

2005; Peng, 2003; Peng et al., 2009). Therefore,

management research on institutions will further

benefit from the expansion of our research frontier

to Africa, whose institutional frameworks (relative

to Asia and Central and Eastern Europe) are even

more different from those in the West. The tradi-

tional approach in management research to keep

institutions as part of the background cannot go

very far in the African context. Therefore, institu-

tions will have to be at the forefront of management

research probing into Africa.

Second, the resources and capabilities view that

focuses on competitive advantage can be enhanced

in Africa. Despite the harsh environment, certain

firms not only thrive in Africa but are also compet-

itive worldwide. Examples include AngloGold

(South Africa), Dangote Group (Nigeria), De Beers

(South Africa), Orascom (Egypt), and Sasol (South

Africa). An increased understanding of the VRIO

drivers behind these firms’ success will greatly en-

rich the development of the resource-based view,

make it more global, and enhance the competitive-

ness of African organizations.

Finally, the interactive or dynamic view we pro-

pose in this article not only fits with other social

science literature but also shows the joint effects of

exogenous and endogenous factors on effectiveness

of African organizations (Jackson, 2013; Zoogah &

Beugre, 2012). Since the 1980s, political science

scholars have argued that formal and informal polit-

ical institutions interact to determine political out-

comes in Africa (Hyden, 2006). This thesis is in rec-

ognition of the confluence of factors that affect the

African context. Inspired by the more integrative ap-

proaches in the larger social science literature

(Hyden, 2006) and in the management literature

(Meyer et al., 2009; Peng, 2014), our approach ad-

vances our understanding of the drivers behind or-

ganizational effectiveness in Africa in a more nu-

anced and insightful way.

Overall, the perspective we suggest in this article

is that we are adopting “theories of context”

(Whetten, 2009, p. 29) to develop context-specific

understandings of Western theories and to present

such Africa-specific theories (e.g., ubuntu) to West-

ern scholars. In other words, we seek to encourage

development of a theory of African management by

applying and refining Western theories in the Afri-

can context, and to develop an African theory of

management by explaining African management

phenomena that are uniquely African. That theory

we suggest is dynamic management. It is based on

the extremely complex and unpredictable institu-

tional environment of Africa.

Practical Implications

During the 1990s, Africa’s annual GDP growth

was a weak 0.9%. In 2012, despite the global reces-

sion, its annual GDP growth was approximately

4.8%.

While much of the developed economies are

engulfed in a slow recovery from the 2008 crisis,

BoP markets, such as those in Africa with strong

(although reduced) growth, have emerged to be-

come more important. It therefore seems that man-

agement researchers, particularly those from the

West, have much to offer and learn from Africa. As

Mark Bristow, chief executive of Randgold Re-

sources, a gold mining and exploration company

with operations in African countries such as Sene-

gal, Mali, Ivory Coast, and the Democratic Republic

of the Congo, observes, “Management is a bigger

risk than politics in Africa.”

In other words, it is

critical to put together a business model and a

management team capable of dealing effectively

with the dynamics of Africa’s emerging markets.

There are several practical implications. First,

the expertise of researchers can help local (African)

organizations harness the potential in African

economies. Strategic orientations, maximization of

labor effectiveness, and expansion into Western

markets can help such organizations sustain pro-

ductivity and innovation. Second, researchers can

learn about the unique characteristics of Africa that

enabled African organizations to survive the recent

global recession turbulence and economic down-

turn. A third practical implication centers on

knowledge exploration and exploitation. We be-

lieve that exploratory methods that focus on Africa

should be encouraged and tolerated by Western

editorial boards. We recognize that our suggestion

is contingent on the interest of these boards. We

call on them to be open to research findings from

Africa (Jack, Calás, Nkomo, & Peltonen, 2008). Our

suggestion is important for the exploration of

knowledge. We recognize that every society has

unique knowledge that can be shared with others.

See http://www.africaneconomicoutlook.org.

22 FebruaryThe Academy of Management Perspectives

Just as Western knowledge can assist African econ-

omies and organizations, it is possible that African

knowledge can be useful to Western economies and

organizations. BoP is an example of knowledge in

non-Western cultures being shared with Western

organizations, especially now that many Western

MNEs are turning to BoP markets for growth and

market opportunities (Babarinde, 2009). Further,

with high rates of unemployment in developed

economies, BoP markets within these economies—

nontraditional BoP markets such as inner cities—

have attracted more attention, necessitating more

learning from firms successfully operating in tradi-

tional BoP markets such as those in Africa.

Limitations and Future Research Directions

The limitations of this article can be overcome in

future work. The first limitation is that we have

focused on theory extension and elaboration. We

have made a series of assertions in the absence of

systematic evidence. We therefore encourage future

research to focus on how the African context pres-

ents opportunities for testing, extending, and build-

ing new theories with a view toward more system-

atic and solid empirical work. The second

limitation is that in our quest for parsimony, we

have focused on only two major theoretical build-

ing blocks (institution-based and resource-based

views). These two building blocks are a starting

point, and are certainly not exhaustive. We encour-

age future exploration of other theories to stimulate

scholarly discourse on developing management

theories relevant to African organizations.

Last, despite the tremendous diversity in Africa,

we have not highlighted any theoretically impor-

tant differences within Africa. While we believe

that our approach of treating Africa as one conti-

nent (one block) is justified given that this article is

positioned to be one of the first to stimulate more

research on organizational effectiveness in Africa,

future researchers may need to differentiate differ-

ent parts of Africa based on regional (such as West

versus East Africa), historical (such as former Brit-

ish versus French colonies), or income differences.

A one-size theory is unlikely to fit all.

CONCLUSIONS

As a field, what we study (and what we do not

study) reflects a great deal of how we view our

world and how effective we are in serving the mul-

tiple stakeholders of management research such as

students, practitioners, and policymakers around

the world. Admittedly, our field now is not as

parochial as when Boyacigiller and Adler (1991)

labeled it a “parochial dinosaur” more than

20 years ago. Yet, as far as management knowledge

on organizational effectiveness in Africa is con-

cerned, the field is still very parochial (Jackson,

2004). For management researchers interested in

bringing more of the rest of the world onto our

radar screen (Hoskisson et al., 2013; Jack et al.,

2008; Wright et al., 2005), Africa represents the last

frontier (Walsh, 2011). We have a responsibility to

maintain and promote the relevance (and rigor) of

our work. As Walsh (2011, p. 230) observes, “Our

noble aspirations and shared values can lead us to

a higher path” by directing our academic lens to

dark corners to shed some light that enriches our

profession and the world at large. In conclusion, if

this article can serve as a lighthouse to more man-

agement scholars’ “passage to Africa” with a focus

on the institutional and resource drivers of organi-

zational effectiveness, our purposes will have been

well served.

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APPENDIX 1

In writing this article, we reviewed Africa-focused

studies in economics, marketing, and management. Us-

ing a structured approach (Easterby-Smith, Thorpe, &

Lowe, 2002; Meyer & Peng, 2005), we conducted an ex-

tensive review of studies on African phenomena in lead-

ing journals in these three fields in the last five decades

(1960–2011) because most African countries gained in-

dependence during and after 1960. For the sake of par-

simony, we limited our review to disciplines that study

organizations primarily or tangentially. We used key-

word searches with a focus on “Africa,” “West Africa,”

“East Africa,” “North Africa,” “Central Africa,” and

countries (e.g., Botswana, Egypt, Ethiopia, Gambia,

Ghana, Kenya, Mauritania, Nigeria, and South Africa).

We searched library databases including ABI/INFORM,

Academic Search Complete, EBSCO, ERIC, JSTOR,

PSYCHINFO, and SOCINDEX, as well as the Web sites of

high-quality journals in management (n ⫽26), marketing

(n ⫽26), and economics (n ⫽30) (see Table A1).

We found a total of 568 articles across the three

major disciplines within the 52-year period. There

28 FebruaryThe Academy of Management Perspectives

were 152 articles (27%) from management—on aver-

age, only 2.64 articles per year for the entire field as

represented by these journals (Table A1). Seventy-

three articles (13%) were from marketing—on average

that represents about 1.46 articles per year. There were

343 (60%) articles from economics, which, on average,

represents about 7 articles per year. Figure A1 shows a

trend of the articles across the three disciplines. Even

though all disciplines show a marked increase in the

number of Africa-centered articles, for economics the

interest was much earlier. The increase in publications

on Africa for management and marketing journals be-

gan in the 2000s.

Despite these positive trends, the proportion is rela-

tively small across the disciplines. For the entire conti-

nent of 54 countries, the representation is on average 3.79

articles per year—an embarrassing 0.07 article for every

country per year.

TABLE A1

Number of Articles on Africa by Period and Journal

(Panel A) Management Journals

Period

Journals 1960–1969 1970–1979 1980–1989 1990–1999 2000–2011 Total

International Journal of Human Resource

Management

0 0 0 4 35 39

Human Relations 1 5 1 3 13 23

Journal of Management 1 0 1 1 14 17

Journal of World Business 0 0 0 0 19 19

Journal of Management Studies 0 620 210

Journal of Applied Psychology 0 331 29

Personnel Psychology 0 420 06

Organization Studies 0 003 25

Strategic Management Journal 0 001 56

Administrative Science Quarterly 3 100 04

Management International Review 0 003 03

Journal of International Management 0 003 03

Academy of Management Journal 0 020 02

Academy of Management Review 0 101 02

Journal of International Business Studies 0 011 02

Journal of Organizational Behavior 0 011 02

Total 5 19 10 17 101 152

Note: For the following journals we did not find any articles that focused on Africa: Academy of Management Executive,British Journal

of Industrial Relations,British Journal of Management,Industrial and Labor Relations Review,Journal of Management Inquiry,Manage-

ment International Review,Management Science,Organizational Behavior and Human Decision Processes,Organizational Dynamics, and

Organization Science.

2015 29Zoogah, Peng, and Woldu

Table A1

(Continued)

(Panel B) Marketing Journals

Journal 1960–1969 1970–1979 1980–1989 1990–1999 2000–2011 Total

Journal of Advertising Research 020 4410

Industrial Marketing Management 002 439

Journal of Global Marketing 002 169

Marketing Management 001 449

Journal of Marketing 610 007

Journal of Consumer Marketing 000 156

Journal of the Academy of Marketing Science 001 034

Journal of Advertising 000 044

Journal of Services Marketing 000 033

Journal of Product Innovation Management 000 033

Journal of Marketing Research 001 012

Journal of Consumer Research 001 012

Journal of International Marketing 000 022

International Journal of Research in Marketing 000 022

Journal of Retailing 100 001

Marketing Science 000 000

Total 7 3 8 14 41 73

Note: For the following journals we did not find any articles on Africa: Marketing Science,Journal of Personal Selling and Sales

Management,Journal of Marketing Education,Psychology and Marketing, Journal of Consumer Psychology,Journal of Marketing Theory

and Practice, Journal of Marketing Management,Journal of Business and Industrial Marketing,Advances in Consumer Research

Proceedings, and Journal of Public Policy and Marketing.

Source: http://www.ams-web.org

30 FebruaryThe Academy of Management Perspectives

Table A1

(Continued)

(Panel C) Economics Journals

Journal 1960–1969 1970–1979 1980–1989 1990–1999 2000–2011 Total

Economic Journal 3 15 9 35 7 69

American Economic Review 5 4 5 10 40 64

Oxford Bulletin of Economics and Statistics 11 13 4 9 7 44

Quarterly Journal of Economics 41021017

Journal of Economic Literature 00351220

Journal of Human Resources 00131519

Review of Economics and Statistics 2122 815

Economics Letters 00011314

European Economic Review 0044 513

Journal of Economic Perspectives 0006 511

Journal of Public Economics 0004 59

Econometrica 1013 27

Journal of Political Economy 0102 47

Journal of Monetary Economics 0010 67

Journal of Economic Dynamics and Control 0000 55

Journal of Environmental Economics and

Management

0011 35

Journal of Applied Econometrics 0000 44

Journal of Financial Economics 0000 33

Scandinavian Journal of Economics 0110 13

Review of Economic Studies 0000 22

Journal of Business and Economic Statistics 0000 22

Economic Theory 0001 12

Journal of Mathematical Economics 0000 11

Total 26 36 32 88 161 343

Note: For the following journals we did not find any articles on Africa: Journal of Economic Theory,Journal of Econometrics,

Econometric Theory, Games and Economic Behavior,International Economic Review,Journal of Labor Economics, and RAND Journal of

Economics.

Source: http://faculty.maxwell.syr.edu/whorrace/journals.htm

FIGURE A1

Articles on Africa Published in Leading Journals

in Management, Marketing, and Economics

Between 1960 and 2011

2015 31Zoogah, Peng, and Woldu

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