Reframing institutional voids as an opportunity to build inclusive markets

This paper received the 2024 Academy of Management Journal Impact Award. 

If markets are a tool for economic and social development, all those who contribute should be able to benefit from them. But weak market institutions are seen as creating voids that reinforce, rather than reduce, social inequalities.  

However, research by Johanna Mair (Stanford University), Ignasi Martí, Director of the Institute for Social Innovation at Esade, and Marc J. Ventresca from the University of Oxford, published in The Academy of Management Journal, demonstrates that these voids aren’t empty of specific institutions, but are instead filled with conflicting local political, community and religious factors.  

“These apparent institutional voids can be seen as useful problem-sensing tools. They can help to diagnose conditions that need to be addressed for inclusive market initiatives to develop,” the authors say. When reframed from this perspective, the drivers of exclusion and inequality can be identified and solutions implemented. 

A local perspective on global markets

To develop this theory and present a new perspective on market building, the authors collaborated with Building Resources Across Communities (BRAC), a now-global organization formed in Bangladesh in 1972. 

Rural Bangladesh offers a rich case study to examine market building as a tool for economic and social development

Since its inception, BRAC has experimented with a range of activities and programs to achieve its goals, including microfinance, health services, education and legal aid. It began to incorporate market mechanisms into its approach in the 1990s, when it shifted its focus from village-level communities to women’s economic empowerment and participation.  

After recognizing that access to financial services alone was insufficient to generate strong market-based activities, BRAC began to offer wider support. Access to assets, help with product marketing and other aspects of entrepreneurial support were provided, with the aim of facilitating sustainable livelihoods and creating local jobs.  

This setting offered the researchers a rich empirical case study to develop a grounded theory of institutional voids, examine market building as a tool for economic and social development, and link the complex context of rural Bangladesh directly to organizational theory. 

Reinforcing local importance

At the time of data collection, BRAC operated in all 64 districts of Bangladesh, which included 70,000 villages and 80 percent of the country’s population. Although the country had made progress with policies focused on alleviating poverty and creating equality, institutional configurations presented major economic barriers to rural communities and had a disproportionate impact on women.  

The researchers analyzed selected BRAC programs over six years, collecting historical and current data from a variety of sources, observing participants in multiple site visits, conducting in-depth and semi-structured interviews with participants, and holding regular consultations with the BRAC founder and chairman, Fazle Abed. Interviews were held with external sources, including NGOs, and data was gathered from them. 

Regardless of policies and legislation, the customs, traditions, and religious beliefs of grassroot communities are more likely to dictate local market activities

By exploring and analyzing the views and experiences of people on the ground in Bangladesh, the researchers were able to expose the importance of the community, political and religious institutions in rural Bangladesh within the formal market institutions of property and autonomy.  

The research revealed two broad positive interventions: activities that redefine market architecture and renegotiate existing arrangements to offer access to previously excluded groups; and activities that offer legitimacy to new actors by building awareness and constructing social narratives that support the entry to market of these groups. 

Creating new structures

Within the redefining market architecture theme, a wider set of activities was identified that successfully provided structural institutional interventions:  

• Creating spaces for interaction to tackle structural inequality by offering structured opportunities for ‘equal’ face-to-face conversations (for example, between villagers and co-workers) and ‘unequal’ interactions (such as those between workers and leaders seen as the ‘elite’, or the traditionally unequal gendered roles). 
• Expanding resource systems by collaborating with existing government systems and social service providers. 
• Redefining local arrangements by building on local means of issue resolution and making use of customary sources of local support. 

Enhancing collaboration

In terms of boosting the legitimacy of new market actors, two areas were identified: 

• Developing sensemaking capacity to facilitate conscientization (individual and collective self-reflection) and increase knowledge of repertoires (support marginalized groups to identify and appreciate their own skills). 
• Recombining norms and traditions by demystifying traditional structures and educating marginalized groups on their own belonging within these structures; and adopting artistic traditional performances to embrace the cultures of marginalized groups within the communication sphere. 

Economic markets rely on a complex network of constitutions, laws, rights and regulations. Alongside these formal institutions sit the customs, traditions and religious beliefs of the local communities in which the markets operate. Regardless of how policy is shaped or legislation is formed, it’s the latter set of rules which are more likely to dictate the activities that are implemented locally.  

By analyzing the complexities at play within rural Bangladesh, the researchers illustrated how traditions and culture can be embraced and, rather than viewed as an institutional void, to proactively address inequalities and create legitimacy.