Navigating informal business institutions in Africa: Expatriates’ response to the ‘magendo’ phenomenon in Uganda

Abstract

This paper explores how expatriates deal with host country informal business practices that differ from their home country institutional frameworks. We note that expatriate business people working in emerging markets of Africa often contend with corrupt business practices rooted in local informal institutions and the lack of strong formal institutions regulating business practices. We also observe that while local people take informal institutions such as magendo, as a way of life and adjust to them, expatriates being ‘outsiders’ respond in different ways. The study employed a qualitative phenomenological design that involved in-depth interview of a small sample of expatriates operating in Uganda. For data analysis, NVivo 11 was used to search for and retrieve chunks of labelled data. The key findings indicate that expatriates from countries with strong formal institutions experience the most frustrations and often reject informal business practices. On the other hand, expatriates from countries with weak institutions are more pragmatic and easily adapt to existing practices in the new environments. Multinationals however, often reject informal business practices due to their market power and strict codes of conduct.The study recommends that small-medium category expatriates targeting Africa need to align with influential local people so as to navigate business informalities that characterise informal business environments.