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Institutional Voids in Entrepreneurial Opportunities

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As the business world keeps on changing in dynamics, new markets are emerging every now and then, presenting new opportunities to existing and new businesses. Unlike the developed economies/markets, the emerging market usually lack proper structures for enabling the businesses which are investing in those market to set-up and run smoothly. This lack of proper institutions and structure to help businesses in connecting to the market is what is described by Professor Tarun Khanna as Institutional void.

Institutional voids normally present challenges for businesses operating in the area where they exist. Businessmen are not able to access services that help in facilitating trading such as banks, forex services and other infrastructural facilities. This makes the ease of doing businesses in those areas very low. Companies are forced to incur extra expenses to acquire the infrastructural services elsewhere. However, it can also be an opportunity for entrepreneurs to take advantage of the situation and fill the void by providing for the missing services at a fee. This essay will critically analyze if institutional voids can provide opportunities for entrepreneurs to thrive and exercise their entrepreneurship.    

General Approaches to Exploring Opportunities Where Institutional Voids Exist

There are generally two approaches in which businesses can explore opportunities in regions where institutional voids exist: –

  1. Filling the void action

The direct approach is for entrepreneurs to identify something that is missing in the region/country and set-up a business that provides a remedying product/service. This approach is the most commonly adopted by entrepreneurs as it is easy to identify and set-up. Remedial businesses set-up to fill a certain void exist all-over the world and include employment agencies, forex bureaus, communication services centers etc. They spring-up whenever there is an unfulfilled demand for a certain product or service in a market that is just getting to its feet.

While setting-up a void filling business, the entrepreneur should consider the longevity of demand of the service that is vacant. If the region/country is such that the void is not bound to be filled any time soon, the entrepreneur can make long-term investment on the service. For instance, in a country where the cultural/religious norms prevent women from working in certain professions, an entrepreneur can invest heavily on a fledging employment agency to bring in female employees from other countries/religions to fill in that void since he/she is sure that religious/cultural norms rarely ever change. An example is the employment bureaus which sprung up in middle eastern countries to employ women house-helps, waitresses, bar-ladies and other positions after the economic fortunes of these countries changed due to discovery of oil.

  1. Services That Restructure Businesses to Adopt to The Void

The second approach is for entrepreneurs to provide services that offer “an evasive solution to the void” to companies. The entrepreneur identifies an existing void in a country and sets-up a consultation business whose purpose is to identify ways a company can restructure its operations to avoid the need for the service that is in void. This approach is more complex since it involves combining several professional competences so as to provide customized needs for each business client. The entrepreneur is contracted by companies to come and identify and develop a business model which will make it possible for the company to operate without the need of the service that is lacking in that country. Such businesses exist all-over the world, especially in developing and emerging economies and provide services such as business operating software, business solutions and integration etc.

The companies can opt to outsource the portion of its operation which requires the “voided” service to the consultancy firm or contract the consultancy to offer software and system integration to the company’s operations to bypass the “void”. This approach is usually adopted by businesses which have accepted that the problem of the institutional void will always exist in that region/country and the only solution is to eliminate the need of the “voided” service/product. Consultancy firms providing such services have existed for a long time, some of them growing into multinationals.

How Entrepreneurs Can Exploit Institutional Voids

An entrepreneur who wishes to set-up a successful venture in a country/region with an institutional void has to put into consideration the following: –

  • Niche market – the entrepreneur has to identify a country/region which has a niche market for the service that he/she is providing. This means he/she has to do a detailed research in order to establish the viability of the business he/she wants to establish. This can be done by identifying the number of companies/individuals who lack the service and evaluating the number of those who maybe will be willing to hire for the service. An example is the Blue River capital established in India in 2005 to provide investment options in India’s emerging economy.
  • Provide a niche product/service that is unique from competitor’s – The entrepreneur has to ensure that he/she offers a product that not only provides an effective solution to the “voided” service but is also unique and costs less. In this case, Blue River capital opted to target a niche market of private (family owned) companies and public firms that were not trading actively in stock exchanges while other venture capitalists concentrated on large, publicly trading companies. The result is the company grew to one of the biggest venture capital companies in India today.
  • The emerging market’s social and cultural dynamics – While setting-up the service provision mechanism, the entrepreneur has to consider the social and cultural dynamics of the country/region in which he/she is investing. The service has to not only be effective in solving the “void” problem but also consider cultural sensibilities and social dynamics of the population. For instance, in a country like India, most medium (and large) companies are run by family members and business owners wish to bequeath their children the business once they retire. In order to capture more customers, the entrepreneur has to structure his/her product in a way that ensures the family unit is covered in the service provision process so as to get acceptance by most businesses in that country.    


Institutional void is the absence of relevant structures and institutions needed by companies to operate adequately in emerging economies. This absence usually results in companies incurring extra operational expenses such as transport, labor, communication etc. On the flipside, the absence of these services can also be an opportunity for entrepreneurs to exploit the void created by lack of institutions and set-up service provision businesses to cater for the “voided services”

For an entrepreneur to be successful n establishing a business in an emerging market, he/she has to identify the country with the need for the “voided service”, identify a niche market or service that is adequate and unique to the market and factor in cultural and social sensibilities of the population in the emerging market.

Although institutional voids tend to encourage corruption, business shortcuts and political patronage especially in third world countries without strong democratic economies, it can be an opportunity for entrepreneurs to identify and run successful businesses to fill-in the void created by the absence of strong institutions to provide that service.

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