Institutional Voids, Power Distance, and the Localisation of Reward Systems in Multinational Subsidiaries: Evidence from Uganda

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This study investigated how institutional voids and power distance shape the localisation of reward systems in multinational corporation (MNC) subsidiaries within Uganda. The primary objective was to examine the adaptive strategies employed by foreign subsidiaries when navigating weak formal labour market institutions and high cultural power distance. Using an exploratory qualitative case study design, data were collected through semi-structured interviews, key informant interviews, and documentary analysis across five purposively selected MNC subsidiaries operating within the manufacturing, telecommunications, and financial services sectors in Kampala, Uganda. The sample comprised 24 key organisational actors, including human resource directors, line managers, and local union representatives. Data were analysed inductively and abductively using thematic analysis anchored in neo-institutional theory. The findings reveal that institutional voids in formal regulatory oversight force subsidiaries to substitute formal performance metrics with localised, relational, and welfare-driven compensation mechanisms. Furthermore, pervasive high power distance values normalise top-down, centralised reward allocation practices, which local employees perceive as legitimate despite structural inequities. The study concludes that the localisation of reward systems in sub-Saharan Africa is not merely a passive cultural compromise but a strategic, abductive alignment to institutional deficits and cultural realities. It is recommended that MNC executives decouple Western-centric meritocratic compensation models from African operations, shifting instead toward hybrid reward frameworks that integrate formal performance incentives with community-centric social safety nets

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