Managerial Ties and MNCs' Performance in Ethiopia: The Moderating Effect of Institutional support

Abstract

Managerial ties are becoming crucial success drivers for MNCs in developing and emerging economies. The managers of multinational companies establish networking relationships with government officials and other business actors to secure access to resources, information, and infrastructures that enables them to provide a buffer against the high level of business environment uncertainty. In this way, this study develops and tests an interactive perspective that emphasizes the interaction of managerial ties and institutional support (e.g., implementation of policies, industry information, import-export services, and local resources such as land, electricity and human resources) in influencing MNC performance in Ethiopia. The proposed hypothesis was tested using hierarchical regression results, which were then double-checked using a process model, and the results were consistent. Based on a sample of 227 multinational companies in Ethiopia, it is found that both political and business ties have positive and significant influence on firm performance, and political ties have stronger effect on firm performance than business ties. In addition, in both ties, the interaction effect of institutional support on firm performance is negative. As a result, we conclude that both political and business relations promote MNC performance, but that the value of political and business ties is conditional on the strength and weakness of the government's institutional support.