The Influence of Generalized Institutional Inefficiencies on Firms’ Ownership Strategy in the MENA Region

Bouzamel, Youmna

http://hdl.handle.net/10400.8/9729

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Authors

Bouzamel, Youmna

Advisor(s)

Reis, Nuno Manuel Rosa dos

Santos, João Neves de Carvalho

Abstract(s)

This study investigates the influence of generalized institutional inefficiencies on ownership strategy in the Middle East and North Africa (MENA). It also tests the moderating effects of informal institutional distance and experience on this relationship. Drawing on institutional theory, the study explores challenges faced by foreign firms that are unfamiliar with the institutional environment of the MENA region and examines their need to share ownership with a partner to access local knowledge and gain legitimacy. It also highlights the idiosyncrasies of the MENA region, and the interplay of formal and informal institutions. The empirical analysis is based on a sample of 1050 foreign firms with subsidiaries in 12 countries of the League of Arab State. It shows that firms facing high levels of generalized institutional inefficiencies are likely to choose more ownership in their subsidiaries, informal institutional distance and experience having no significant impact. Results shed light on potential underlying motives that shape firms’ ownership strategy in an effort to cope with generalized institutional inefficiencies.