The Impact of Institutions on Strategy in the Agro-tech Sector: A Case Study of Agro-tech SMEs in Ghana

Abstract

SME development is often considered a key driver of economic growth in Africa. However, strategic management literature rarely studies SME strategy in an African context. This thesis seeks to extend this body of literature through the case of Ghanaian ICT companies operating in the agricultural sector, referred to as agro-tech companies. Agro-tech companies offer cutting-edge solutions to optimizing productivity in the agricultural sector in Ghana and often sell their ICT-based services through mobile-platforms directly to smallholder farmers. Despite their recent emergence in the Ghanaian business landscape, agro-tech companies have already made a great impact through their services, by connecting smallholder farmers to knowledge and networks. However, they encounter many barriers in their environment that jeopardize their long-term growth prospects. Using an Institution-based view on strategy, we explore how agro-tech companies’ institutional context impacts their strategic choices, which requires an examination of their strategies and external environment, including industry conditions and institutions. We take our point of departure in the experiences of Esoko, Syecomp and Farmerline, three successful SMEs in the agro-tech sector. We find that these three companies have been able to survive in their hostile environment by using a strategy consisting of a mix of strategic choices that answer the company’s internal need for resource maintenance & upgrading and respond to external expectations. Our findings show that institutions impact agro-tech companies’ strategic choices in four different ways. Firstly, formal institutions such as the MoFA, NGOs in the agricultural sector and the financial system in Ghana shape social pressures in the case companies’ environment, which managers must align through their strategic choices in order to remain legitimate. Secondly, institutions determine the most important resources in the agro-tech sector and their value. These resources are technological knowledge, financial resources as well as a strong network and reputation, and the configuration of these resources in turn decide which strategic choices are possible for the company to implement. Thirdly, by impacting the value of resources, institutions also influence competitive dynamics in the agro-tech sector. We found that the competition over financial resources incentivizes managers to take paradoxical strategic actions. Finally, institutions create constraints for the companies, which they must respond to directly through their strategic choices, however institutions also offer cost-effective opportunities for companies to execute their strategies.