Sub-theme 18: Once More unto the Breach: Filling Institutional Voids in Emerging Markets
Call for Papers
Emerging markets are frequently characterized by "institutional voids" including underdeveloped capital markets, absence of intermediary firms, adequate regulatory systems or contract enforcing mechanisms to facilitate the functioning of markets (Khanna & Palepu, 1997). The IB literature recognizes that institutions matter, but hitherto mainly as an exogenous factor (Tracey & Phillips, 2011). To date, the IB literature has not systematically addressed how specific actors deal with, shape or remedy institutional voids in their intent to succeed in emerging markets.
At least three relevant actors engage in institutional entrepreneurship in the context of filling voids across borders:
- Business groups can compensate for missing institutions by offering goods and services within the group such as an internal capital market or business transactions within a trusted network of contracts to mitigate the risks associated with a weak legal contract enforcement (Khanna & Palepu, 2010; Fisman & Khanna, 2004).
- Multinational enterprises (MNEs) adopt cross-border strategies that 'continuously evolve through interactions in host countries' (Meyer & Nguyen, 2005: 67). Their void-filling actions are understood as adaptation to host contexts (e.g. Kwok & Tadesse, 2006). They develop relevant cross-border skills to manage weak institutions as they confront underdeveloped institutions that either forestall market transactions or increase their costs (Cuervo-Cazurra & Genc, 2008).
- In many emerging economies, the state exercises influence over business strategy, through close business–state relationships (Mair et al., 2012) or directly through ownership. States can also shape how home or host country MNEs respond to institutional voids through, for instance, partnerships between foreign investors and local firms with privileged political ties (e.g. Henisz & Zelner, 2005).
With this call, we aim to explore institutional entrepreneurship in the context of institutional voids in emerging markets, with a particular emphasis on actors, such as MNEs, states and business groups that fill voids. We encourage conceptual and empirical contributions that draw on different theoretical streams and disciplines, adopt diverse research methodologies and examine multiple levels of analysis.
Some suggested issues for consideration are:
- How can the IB literature be advanced through an analysis of how multinationals, firms and other actors cope with foreign markets through void-filling strategies?
- How do actors such as states, MNEs and business groups address 'institutional voids' at home and abroad?
- Under what conditions and through which processes do business groups, MNEs and the state contribute to creating new institutions or modifying existing ones?
- In which ways does multinationalization via the state present new challenges to theorizing on multinationals and internationalization?
- Under which conditions do institutional voids in emerging markets encourage non-market strategies?
Cuervo-Cazurra, Alvaro & Mehmet Genc (2008): 'Transforming disadvantages to advantages: Developing-country MNEs in the least developed countries.' Journal of International Business Studies, 39 (6), pp. 957–979.
Fisman, Raymond & Tarun Khanna (2004): 'Facilitating development: The role of business groups.' World Development, 32 (4), pp. 609–628.
Henisz, Witold J. & Bennet A. Zelner (2005): 'Legitimacy, interest group pressures, and change in emergent institutions: The case of foreign investors and host country governments.' Academy of Management Review, 30 (2), pp. 361–382.
Khanna, Tarun & Krishna G. Palepu (1997): 'Why focused strategies may be wrong for emerging markets.' Harvard Business Review, 75 (4), pp. 41–51.
Khanna, Tarun & Krishna G. Palepu (2010): Emerging Markets: A Road Map for Strategy and Execution. Boston: Harvard Business Press.
Kwok, Chuck C.Y. & Solomon Tadesse (2006): 'The MNC as an agent of change for host-country institutions: FDI and corruption.' Journal of International Business Studies, 37 (6), pp. 767–785.
Mair, Johanna, Ignasí Marti & Marc J. Ventresca (2012): 'Building inclusive markets in rural Bangladesh: How intermediaries work institutional voids.' Academy of Management Journal, 55 (4), pp. 819–850.
Tracey, Paul & Nelson Phillips (2011): 'Entrepreneurship in emerging markets: Strategies for new venture creation in uncertain institutional contexts.' Management International Review, 51 (1), pp. 23–39.