Entrepreneurs in emerging markets face unique challenges and chances. Unlike those in more developed economies, where established infrastructure and regulations often shape the business landscape, emerging economy entrepreneurs operate amidst distinct challenges, often viewed as unbeatable. These challenges, however, serve as fertile grounds for bright minds to innovate and find solutions.
“Institutional voids,” a term derived from Harvard Professor Tarun Khanna’s research on entrepreneurship in emerging markets, refers to gaps in the institutional framework. These gaps, such as inadequate legal regulation, lack of infrastructure, or limited training, take diverse forms depending on the nature and culture of the country and its nation.
These institutional voids offer opportunities for entrepreneurial intervention. Entrepreneurs can, and should choose to, see these voids not as difficult barriers but as windows for truly creative problem-solving.
Consider Amul, the world’s largest producer of milk and milk products. Founded in 1946 in India as a cooperative society by Tribhuvandas Kishibhai Patel, Amul’s inception was a response to the exploitation of small dairy farmers. At the time, milk prices were arbitrarily determined, which gave a company called Polson almost complete control over milk collection.
Amul’s solution was an innovative cooperative business model. Instead of owning farms or cattle, Amul united farmers with varying production capacities to become providers. This cooperative approach enabled farmers to earn fair income while maintaining high product quality and efficient centralized processing.
Addressing these institutional voids isn’t a one-size-fits-all endeavor for sure. Entrepreneurs must deeply understand their local market context. What works in one region may not apply elsewhere. Mastering these voids requires grasping the specific challenges at hand, and can only be acquired through actual experience.
But today, one might argue that investors in emerging economies tend to shy away from risks. They often prefer investments mirroring successful businesses in more developed countries, seeking the comfort of proven concepts. This preference leads to the replication of existing ideas, stifling innovation and limiting economic growth, for such emerging economies.
Genuine economic growth in emerging economies demands creativity and tailored solutions addressing unique institutional voids. Rather than reproducing foreign successes, it’s essential to craft local solutions. These voids hold immense potential for groundbreaking ideas that can reshape industries and foster sustainable development.
By recognizing that these voids have great potential for creative problem-solving, embracing cooperative models like Amul, and championing local solutions, entrepreneurs can build thriving businesses and drive economic growth from within. These voids hold the seeds of true innovation and prosperity, but only if they find proper support from within the ecosystem.