Institutional Voids and the Governance of Developing Economies

This symposium seeks to explore the phenomenon of institutional voids and to locate the actors, sources of entrepreneurial agency, nature of government-business relations, structure of social order, and  wider socio-political context conducive to new forms of governance that fill those institutional voids.

Convenors:
- Prof. Tak-Wing Ngo, IIAS Centre for Regulation and Governance
- Dr Marleen Dieleman, Centre for Governance, Institutions & Organizations at NUS Business School, National University of Singapore
- Dr Mark Greeven, Rotterdam School of Management, Erasmus University

A common problem faced by many developing countries is the presence of institutional voids. While it is an established wisdom that institutions matter in development, most developing economies are characterized by the absence of much-needed institutional arrangements to regulate market exchange, mobilize economic resources, and coordinate social activities. Such institutional voids are sometimes filled by unconventional actors/organizations that, in the process of negotiating rules, resources, and discourses with formal and informal circuits of power, contribute to the emergence of alternative forms of governance.

Institutional voids arise during the development process from two related sources. The first concerns the problem of institutional supply. Countries which are moving away from a centrally planned socialist system (such as China, Vietnam, Russia, and to a lesser extent India) need to invent market mechanisms. An embryonic market economy may lack the necessary “market institutions” to coordinate capital, labour, and product transactions via contractual exchange mechanisms. There is a relative lack of intermediary firms, accounting practices, price mechanisms, distribution networks, etc., to organize economic exchange. At the same time, countries which experienced civil unrest, patrimonial politics, or long periods of colonial or dictatorial rule, often lack the necessary “state institutions” to regulate economic activities and transactions  in terms of enforcing contracts, protecting ownership, and promoting development. In many instances, both types of institutional voids are present.

The second source concerns the problem of institutional redundancy. Existing institutions which once performed a developmental function can be subverted by new practices. Institutions can become ineffective – thus leaving a gap between existing and desired regulatory arrangements – or become inert, thereby leaving an ingrained and pervasive set of structures that obstructs the establishment of new institutions. This is often the case with countries under reform but is not necessarily confined to them only. In fact, it has been increasingly recognized that even in the case of industrialized societies, the increased threat of social risks as a result of globalization, as described by Ulrich Beck, can no longer be adequately dealt with by conventional state institutions. The prevalence of informal politics – practices taking place outside the formal political institutions – has rendered conventional institutions based on formal rules and hierarchies redundant.

Existing scholarship has long studied societies where the absence or weakness of particular institutions has inhibited social and economic development. The notion of institutional voids suggests that there are widely accepted standards as to the types of formal institutions that are essential for the proper functioning of market economies and the actors that should control  those institutions. Yet recent research questions whether institutional arrangements in emerging market should be modelled after best-practices of developed countries. Furthermore, a growing number of empirical studies on emerging markets have documented intriguing cases where entrepreneurial actors – public and private, organizational and individual – have trespassed  the boundaries of formal rules and institutions to create formal and informal spaces of governance which perform important developmental functions. These studies are anchored in a wide variety of disciplines. In management and organization studies, researchers have focused on firm-level governance and highlighted the agency of private firms. They see institutional voids as spaces of opportunity and underline entrepreneurial agency exercised by private firms in effecting organizational transformation, overcoming bureaucratic barriers, or replacing public institutions in the organization of resources and coordination of development. In anthropological studies, researchers have been sensitive to the significance of traditional and localized practices in fulfilling modern developmental functions and overcoming problems of collective action. In political science, the limitation of state-centred analysis has been recognized along with the increasing importance of transnational and local networks. Multi-level governance which transcends the public-private boundary has eroded conventional institutions, giving rise to a diversity of alternative political spaces. In development studies, it has been argued that state institutions of certain newly industrialized economies, characterized by technocratic competence and social embeddedness, have displaced the market in coordinating capital accumulation and industrialization. However, despite all these efforts, there has been a dearth of systematic efforts in exploring the questions of how and under what circumstances can institutional voids be filled by what kinds of actors and with what consequences.

Objectives of the Symposium

Given these diverse findings, the symposium aims to take stock of the theoretical insights and move the research frontier forward. The goal is to systematically map out the various aspects of institutional voids and their implications for development, compare theoretical concerns across different disciplines, and identify gaps in our existing knowledge.

 The symposium seeks to address the following topics:

1.  examination of empirical cases where public actors perform market functions and private actors undertake regulatory responsibilities in the absence of effective institutions
2. identification of the political/organizational/social bases of agency, institutional entrepreneurship, and innovation at the national, sub-national, local, and firm levels
3. analysis of the broader social, political, coalitional, and economic contexts that enable/support the creation of alternative forms of governance or accommodate shifting forms of self-governance
4. reflection upon existing theories of agency, strategy and institutional change, as well as conventional concepts about the public-private boundary and the state-market dichotomy
5. re-theorization of the concept of “institutional voids” to incorporate new formal and informal institutional arrangements arising in emerging markets

Programme 

Please click here for the preliminary programme.

Organizers

The symposium is jointly organized by the IIAS Centre for Regulation and Governance, the Faculty of History and Arts at Erasmus University Rotterdam, Rotterdam School of Management, and the Centre for Governance, Institutions & Organizations at NUS Business School, National University of Singapore.