Resources and Governance in Response to Institutional Voids: Investigating Renewable Energy Partnerships in Kenya

Description

Abstract:

Sub-Saharan Africa (SSA) is often referred to as the last frontier of the global economy and represents a challenging environment for business activities. At the same time, limited government capacity to deliver basic infrastructure and services, such as water and electricity, particularly in rural areas, has far-reaching consequences — affecting, among other aspects, the provision of health services, education opportunities, and productivity. Proponents of the Base of the Pyramid (BoP) approach maintain that firms from advanced economies are uniquely positioned to deliver such products and services and, with the right strategy, can do so sustainably (profitably). To deal with the institutional conditions in low-income markets, the BoP literature emphasises the importance of establishing partnerships with local firms and NGOs. Yet, while the rationale for engaging in partnerships is well documented, less is known about the specific mechanisms that influence how partnerships function in developing countries. As such, this thesis aims to investigate factors that influence how organisations realise the potential of partnerships under BoP conditions, by conducting a case study of the renewable energy sector in Kenya.  

Taking point of departure in institutional theory to identify drivers and constraints for business activities in developing countries, propositions from the Relational View (RV) are applied to investigate firm-level factors that may influence how foreign RE firms and their local affiliates establish and maintain partnerships. In doing so, this thesis provides a conceptual as well as an empirical contribution.

Focusing on resources and governance mechanisms, propositions of the RV are applied to qualitative data from seven RE companies in Kenya. The analysis sheds light on how the propositions manifest at the BoP in Kenya and identifies factors that may influence how value is generated between RE firms and their partners.

The Empirical findings highlight the importance of synergy-sensitive resources (SSRs) in generating inter-organisational value. Reputation was identified as an especially important SSR (particularly for small companies and new entrants), which could be ‘outsourced’ to locally embedded organisations.   Furthermore, synergy-dependent partnerships were identified involving several organisations (synergistic trios). It was found that by combining the SSRs of a third organisation, firms could significantly increase the value of their own and their partners’ resources. The positive influence of SSRs was moderated by additional factors including the alignment of objectives, which in some cases was shown to conflict in non-traditional partnerships (e.g. involving NGOs). The case data also indicated, unexpectedly, that under certain conditions engaging in partnerships could reduce opportunities for internalizing knowledge and ‘learning by doing’.

Conceptually, the thesis finds that the RV and its constructs of resources and governance align closely with the assumptions of institutional theory and the BoP literature and provide a relevant lens for BoP research. By framing the RV in the prescriptions of the BoP literature, findings from the analysis add insight into the BoP recommendations regarding network embeddedness, local capacity building and engaging with non-traditional partners. Theoretical and practical implications of these findings are discussed.