Multinational enterprises and the provision of collective goods under formal and informal institutional voids. The case of electricity in sub-Saharan Africa

Abstract

Despite their unprecedented growth, developing countries still face severe problems in the provision of collective goods. Electricity, whose provision is scarce or unreliable in most developing regions, especially in sub-Saharan Africa, is an emblematic case. The reason for this shortage is not only imputable to the lack of effective formal institutions, but also to the inefficacy of informal institutions in enabling alternative solutions for the production, transmission and distribution of electricity. In this context of “double institutional void”, multinational enterprises (MNEs) can play a decisive role. However, we claim that their effectiveness depends on both the formal and informal institutional proximity that exists between the country of origin and the destination of the multinational company. Our econometric analysis relies on a sample of pairs of home-host countries, the latter of which are all from sub-Saharan Africa, observed from 2005 to 2011. Our findings confirm our expectations