Institutional voids are impediments to a thriving market economy and cannot simply be mandated away. It takes a substantial amount of work, expertise, and time for gaps in infrastructure and intermediaries to be recognized & addressed.

Source: Prof. Tarun Khanna (HarvardX)

Spotting Institutional voids thus provides a crucial jumping-off point for assessing business opportunities, market conditions, and risk.

But how does one begin to recognise Institutional voids?

Activity in any economy is driven by three major markets:

  • Product
  • Labour
  • Capital

Institutional voids can be found in any or all of these markets in developing countries.

Institutional Voids

The Power of Context

The unique Institutional context of a market determines the ways in which an entrepreneur can intervene, and to a greatest extent, also determines the successor failure of a particular strategy.

Within a given market, there maybe a number of appropriate interventions & opportunities, including:

  • Replicate or adapt an existing business model in that market.
  • Collaborate with domestic partners or go alone.
  • Navigate around that market’s voids or actively try to fill them.
  • Enter the market now or look for opportunities elsewhere.
  • Stay in or exit the market if current strategies are not working.

One needs to understand the Institutional structure of the economy to understand how to solve its problems.

Source: Prof. Tarun Khanna (HarvardX)

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