The Institutional Contingencies of Business Innovation In Low-Income Markets: The Global Growth and Commercialization of Microfinance, 1998-2008
type: CreativeWork
description: In this study, I develop and test an institutional-contingency model for explaining business innovation in low-income markets of less-developed countries. To build the model, I begin with the basic insight of the BOP literature: that there exist both social and business motives for firms to enter impoverished markets. I then extend this assertion by defining poverty as a function of not only income but also institutions; it is not only income poverty that managers need to account for when entering low-income markets, but also the institutional context in which that poverty is embedded. An important implication of the institutional contingency model is that national context will likely shape: 1) the ability of a business innovation formed in one less-developed country to transfer and grow in another; and 2) the conditions when for-profit governance will be more effective than non-profit. My model also contributes to the international-business literature. IB research that studies the transfer of business practices usually examines the flow of practices from advanced to less-developed countries. In contrast, my model looks at the transfer of indigenous practices created within less-developed countries themselves, a topic rarely examined in the literature. A challenge of analyzing the transfer of practices across low-income countries is that we do not know which institutions matter in this process. Institutional factors that distinguish among rich countries, or even between rich and poor countries, are not necessarily those that distinguish among poor countries themselves. For instance, the IB literature often assumes that a country's "regulatory" pillar (as measured by formal laws) will be relatively strong. But, this assumption may not hold in less-developed countries. To develop specific institutional measures for analyzing differences among less-developed countries, I introduce the concept of "state fragility." This measure has been found to capture variation in the…
abstract: In this study, I develop and test an institutional-contingency model for explaining business innovation in low-income markets of less-developed countries. To build the model, I begin with the basic insight of the BOP literature: that there exist both social and business motives for firms to enter impoverished markets. I then extend this assertion by defining poverty as a function of not only income but also institutions; it is not only income poverty that managers need to account for when entering low-income markets, but also the institutional context in which that poverty is embedded. An important implication of the institutional contingency model is that national context will likely shape: 1) the ability of a business innovation formed in one less-developed country to transfer and grow in another; and 2) the conditions when for-profit governance will be more effective than non-profit. My model also contributes to the international-business literature. IB research that studies the transfer of business practices usually examines the flow of practices from advanced to less-developed countries. In contrast, my model looks at the transfer of indigenous practices created within less-developed countries themselves, a topic rarely examined in the literature. A challenge of analyzing the transfer of practices across low-income countries is that we do not know which institutions matter in this process. Institutional factors that distinguish among rich countries, or even between rich and poor countries, are not necessarily those that distinguish among poor countries themselves. For instance, the IB literature often assumes that a country's "regulatory" pillar (as measured by formal laws) will be relatively strong. But, this assumption may not hold in less-developed countries. To develop specific institutional measures for analyzing differences among less-developed countries, I introduce the concept of "state fragility." This measure has been found to capture variation in the…
author: Ault, Joshua Kennedy
keywords: Business, Business Administration, Management, and Operations, Base of the Pyramid, Business Models, Less-Developed Countries, Microfinance, Poverty, State Fragility
date published: 2011-01-01T08:00:00Z
date modified: 2026-07-24T04:37:28Z
provider: University of South Carolina
publisher: Networked Digital Library of Theses and Dissertations
type: WebPage
source organization: University of South Carolina