Africa,Corporate Reputation in
While sharing a continental affiliation, the 54 countries of Africa cover a broad geographic region often subdivided into northern Africa, the Horn of Africa, eastern Africa, central Africa, western Africa, and southern Africa. With a lengthy heritage extending into antiquity, Africa is home to some of the world’s oldest recorded cultures, including those associated with Egypt, Nubia, Carthage, and Aksum, among others. Consistent with a social constructivist view of reputation, this long history reflects not only on the reputations of the countries within the region but also on the region’s firms as they are viewed from other countries. The institutions and culture of a society establish expectations regarding companies, which, in turn, influence corporate reputation assessments. Given Africa’s unique cultural background and history, firm reputations within the region will also contain distinctive dimensions derived from Africa’s complex cultural climate. This entry overviews several factors associated with the region that potentially influence reputation development.
An additional element that may be particularly important for African firms as they attempt to establish reputations outside the continent, or even within more distant African countries, is the extent to which African firms are relatively unknown outside the region. Among the most common factors affecting the development of firm reputations is the characteristic of “being known.” However, since most African firms lack this characteristic outside the region, assessors of the reputations of African firms in other areas of the globe may rely on heuristics related particularly to a firm’s home country, a subregion in Africa, or the African continent as a whole when evaluating firms. Several of these factors are reviewed within this entry. Overall, given the complex nature of the African continent, firms may have to make difficult efforts to establish and maintain reputations, while reputation evaluators face a similarly complicated task.
Changing and Challenging Institutional Settings
Institutions relate to established practices and structures of behavior within a society. These can be formal, as in the case of laws, or informal, being established by a common culture. Institutions create expectations regarding appropriate actions within a country, which, in turn, will affect expectations of firms. Recent research suggests that as the institutional development of a country increases, expectations of firms regarding factors associated with reputation assessment similarly increase.
Across the countries of Africa, the level of institutional development varies significantly. For example, World Bank data indicate that the 2014 gross national income per capita (GNIpc) of South Africa was US$6,800, while the country has also been recognized as a member of the BRICS emerging markets (with Brazil, Russia, India, and China), demonstrating significant prospects for future economic advancement. As such, it is not surprising that well over half of the top 50 firms from Africa are headquartered in South Africa. At the other extreme are countries such as Malawi (US$250 GNIpc), Burundi (US$270 GNIpc), and the Central African Republic (US$330 GNIpc). The extreme poverty associated with this level of economic development in many African countries suggests a very different attitude toward corporations and, by extension, much more fundamental expectations that could drive corporate reputations. These stark differences across the continent suggest that members of individual countries will possess differing expectations of firms, ultimately influencing the assessments of their reputations. Reputation expectations regarding companies in relatively wealthy countries such as South Africa will inherently differ from those in severely economically challenged countries, such as Malawi.
Associated with the construct of institutions is the related construct of institutional voids, or the lack of certain institutions, such as a stable legal system or reliable system of payments, that support the efficient functioning of firms within a market. These conditions have been catalysts for institutional change. Within northern Africa and the nearby Middle East, this impetus is illustrated by the so-called Arab Spring, beginning in the northern African country of Tunisia in December 2010 and eventually expanding to include at least 15 countries. The current lack of effective institutions and/or the rapid change in institutional conditions in many countries in Africa create difficulties for assessors to clearly evaluate the reputations of firms within the region. This is most apparent in countries experiencing war and/or political strife. Moreover, the conflicting interests of the various stakeholders involved in conflicts such as these illustrate the degree to which firm reputations may vary depending on the differing expectations of different stakeholder groups.
Natural Resource–Based Industries
Given the institutional difficulties noted earlier, it is not surprising that the largest firms from Africa come predominantly from natural resource–based industries, such as petroleum and mining. These firms predominantly operate in a business-to-business environment, making establishing a corporate reputation among the general population and other local stakeholders less critical to their success. By contrast, they may still rely on the perceptions of industry analysts, who might be less influenced by expectations in the local institutional environment in their reputation assessments of firms. Nonetheless, local stakeholder perceptions may still influence company reputations even in natural resource–based industries, as can be seen in the case of Shell and its operations in the Niger Delta region of Nigeria, where Shell has been accused of human rights and environmental abuses and has been the subject of peaceful protests and violent actions by local groups. These activities influence perceptions of the company both in Nigeria and abroad. Similarly, external pressure has been brought against firms that have profited from what are known as “blood diamonds,” or diamonds mined in war zones in several African countries, starting with Angola in the 1990s, to help fund military action. Additionally, activities such as these have also had reputational impacts for the diamond industry as a whole.
Colonialism played a critical role in the development of Africa, and as such, the colonial heritage will affect perceptions of firms. Belgium, France, Germany, Italy, Portugal, Spain, and the United Kingdom all maintained sovereignty over one or more countries in Africa in the late 19th and early 20th centuries, lasting until a period of decolonization occurring between World War II and the 1980s. Colonial ties create greater knowledge of individual firms that were based on these prior colonial ties, along with associated usages of common languages and other common institutional structures, such as legal systems. While these factors will likely indicate that firms from countries with prior colonial ties will reap higher reputations among residents of the prior colonial power (and vice versa), the nature of the colonial tie and the associated process of decolonization must also be taken into consideration. In the case of South Africa, for example, where decolonization was achieved through a treaty and ties persist with the United Kingdom through the Commonwealth of Nations, firm reputations are likely to be positively influenced by prior colonial relationships. In other instances, where decolonization was achieved by war or rebellion, perceptions of the prior colonial tie, and by extension its firms, are likely to be much more complicated.
The African continent maintains a significant amount of religious diversity, which can influence acceptable business practices of firms and likewise their reputations. In the more Islamic, northern part of Africa, Islamic religious practices influencing the operations of firms are more likely to affect expectations of firms and, by extension, their reputations. For example, as is also the case in much of the Middle East, Islamic banking principles, which strictly regulate interest and fee payments associated with bank loans, will affect behavioral expectations and reputation perceptions of banks. Even when religious principles are not legally mandated, expectations of firms may be driven by religious principles. This influence could occur both within and outside the region. The southern countries in Africa tend to be dominated by various forms of Christianity, which has different expectations of firms that can also influence firm reputational assessments. In addition to Islam and Christianity, traditional indigenous religions still predominate in many Africa countries, which may influence expectations of firms. Firms that operate across different regions in Africa may need to pay attention to the expectations of the various religious groups across the continent, as actions that may be encouraged in one area (e.g., Islamic banking principles) may be less welcome in others.
The issues outlined in this entry are among those making it difficult to assess corporate reputations in Africa. Given that expectations of firms are highly influenced by the context within which they are evaluated, the factors identified herein will likely influence firm reputations in their home countries, within the region as well as in foreign countries.
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