Institutional Voids and Organization

Studies: Towards an epistemological

rupture
By: Bothello, J. ,Nason, R.S.
and Schnyder, G. Published in Organization Studies, 2019

Under Supervisor of Prof. Faisal Qadeer

Prepared by:
Mohammad S. Alhmeidiyeen, PhD
Student LBS, The University of Lahore
 The Authors in their abstract
• They critique the usage of the term ‘institutional void’ to
characterize non-Western contexts in organizational
studies.
• They explore how the concept of institutional voids has led
not only to poor construct clarity, but also pejorative
labeling of non-Western countries.
• They argued that research using this term perpetuates an
ethnocentric bias by deifying market development and
overlooking the richness and power of informal and non-
market institutions in shaping local economic activity.
• They call for an ‘epistemological rupture’ to decolonize
organizational scholarship in non-Western settings and
facilitate contextually grounded research approaches that
allow for more indigenous theorization.
• In early 2018, US President Donald Trump reportedly
referred to African nations as well as Haiti and El
Salvador as ‘shithole countries’.
• The authors focus on the term ‘institutional voids’,
that has evolved into an academic as euphemism for
‘shithole countries’.
• Pinkham & Peng in 2017 defined institutional voids
as contexts lacking market-supporting and contract
enforcement institutions to efficiently facilitate
exchange between firms.
• The institutional void concept has found traction in many
academic domains as it offers a means to capture differences
in non-Western contexts in a manner facilitating comparability
with Western economies. So,
• The Western social scientists have become increasingly
interested in explaining non-Western contexts. Therefore, they
have resorted to vague and amorphous conceptualizations to
increase the theoretical and geographical applicability of
institutional voids.
• The authors pointed out that, the increasing in the extension,
for the word "institutional voids" has compromised its
intension. Moreover, a set of properties that determines the
things the word applies to.
• Therefore, the result, is an increasingly weak
theoretical foundation and an unfounded
benchmarking of foreign countries’ institutional
systems against an idealized Western.
• Accordingly, they proposed abandoning the label
institutional voids altogether, and
• Then they call for an "epistemological rupture" to
decolonize current approaches to non-Western
settings. As the literature fails to recognize pre-
existing, alternative order(s).
 Origins of Institutional Voids

• Institutional voids concept emerged in management and

organization studies, coined by Khanna and Palepu in1997,
proved to be analytically tractable, producing a large
number of studies.
• The idea was born into a clear but important observation for
theoretical development.
• Non-Western organizations are often largely distinct from
their Western counterparts, with some measure of variation
attributed to local institutional arrangements.
• So, the institutions that lacked the requisite market-
supporting institutions were labeled as institutional voids.
 Diffusion and Conceptual Stretching

• The use of the term ( Institutional Voids) has grown

from some articles in the late 1990s to 38 articles in
the year 2017 alone.
Growth in the use of the term institutional voids.
 The extension of applicability accompanied
with some problems:
Problem 1: Narrow scope, broad application.
A map illustrating which countries or regions have
been characterized by institutional voids. There is a
clear extension of the term to cover an increasingly
broad and diverse set of countries from Afghanistan to
Zimbabwe, with a particularly outsized emphasis on
China. The term is even used to classify entire
continents such as Africa and Latin America. Oddly,
developed countries like Taiwan and Germany have
also been labeled as institutional voids.
• The focus on formal legal systems and the application of
judicial rules, this reflects an ethnocentric bias in the
concept of institutional voids and a special fetishization
for the United States.
• US is a near-ideal institutional environment. Indeed, this
is reinforced when institutional void is defined more
broadly as the absence in emerging markets of things we
take for granted.
• Although the original formulation of the institutional void
concept was narrow and US-centric, the increasing
extension of the term results in nebulous
conceptualization and inconsistent application. This
creates a situation where it is not very clear what an
institutional void is.
 Problem 2: Empirical convenience and
methodological shortcomings
• Researchers have generally avoided measuring
institutional voids by limiting their investigations to
contexts which have been previously labeled as
institutional voids.
• This is due to a lack of consensus regarding what the
defining properties (or intension) of an institutional
void are.
• Studies using the institutional voids concept suffer from
the flawed assumption that economic and institutional
development within nations is homogeneous.
• Meanwhile, entire countries or regions are often
characterized as an institutional void, while in reality,
there are stark differences across regions:
• In India, for example, a 2017 corruption survey indicated
that 77% of respondents in a state had experienced
corruption in public services, compared with only 3% in
another state.
• This means that using the term institutional void to
indiscriminately characterize an entire nation reflects a
preference for analytical simplicity over empiric
complexity.
 Problem 3: From ontological assumptions to
conceptual imperialism
• For this problem, the authors pointed out that, much of their
critique is targeted at the transaction cost-based premises
that undergird institutional voids, which are:
 Humans are opportunistic and self-interested by nature,
and
 Markets naturally emerge if opportunism can be minimized
and self-interest channeled productively.
• As the term institutional void becomes subject to
conceptual stretching, so it is note a problem with
terminology, which is the mobilization of the term ‘void’
implies that something is not, but should be present.
There are another three ontological assumptions:
1. Market primacy: the market and its set of supporting
institutions takes priority, sometimes aggressive state
mandates can be more effective than the democratic
process in implementing institutional change.
 On the contrary, where law is nebulously deemed
‘overly enforced and over-tight’ in terms of constraining
market participants’ freedom, informal institutions that
help actors ‘getting around the formal rules’ are
considered desirable. This illustrates an apparent
internal contradiction in institutional voids.
2. Irrelevance of informal institutions
• Informal and cultural institutions are given only
token recognition as ‘barriers’ to good
governance practices.
• For instance, the family firms – both Western
and non-Western it seems equally plausible that
such firms would prioritize organization around
kinship or political concerns rather than
efficiency.
3. Indigenous organizations and practices as incomplete.
• The assumptions embedded in institutional voids suggest
that local organizing principles emerge as makeshift
responses to flawed institutions.
• Many indigenous forms and behaviors are historically
grounded in the context in which they emerged. Far
before the coming of formalized markets, practices such
as gift giving and empathy in many societies; many
continue to operate in the same way.
The result of the ontological assumptions stemming
from the term institutional void is a form of conceptual
imperialism.
 Salvaging Institutional Voids? Gaps, swamps and interfaces

• A recent attempt to rectify the conceptual shortcomings of institutional

voids:
• Gaps: Scholars in corporate social responsibility employ the term
‘governance gaps’ to designate the outcomes of the nation-state’s
declining legal and democratic control over corporate activity.
• Swamps: scholars coin the disparaging term ‘institutional swamp’ to
capture the complexity and richness of institutional fabrics in non-
Western countries.
• Interfaces: others reconceptualization of institutional voids as
interfaces between different institutional orders.
Recasting institutional voids as institutional interfaces is an important
shift from the original, ‘absolutist’ conception of institutional voids
towards a relativist conception.
In this way the ethnocentrism concept is diluted.
 A Better Future: Decolonizing institutional
voids and creating inclusive concepts
• Due to the disquieting evolution of institutional
voids and the insufficient remedies, an engaging
in an epistemological rupture to explicitly rethink
the position of the Western scholar when studying
other parts of the world.
• So, what does an epistemological rupture
look like in practice? the authors forward some
initial steps:
1) Void institutional voids
The authors propose dropping institutional voids from the
academic dictionary.
2) Embrace teleological diversity
We need to reckon with the ontological assumption that
formal market development is the most important societal
goal.
3) Appreciate informal institutions
There is much work to be done to uncover the prevalence,
complexity and power of informal institutions such as those
embedded in family, religion, community and culture.
4) Conduct context-driven research
An epistemological rupture means considering that
accumulated management and organization theory may
actually be hindering authentic understanding of non-
Western contexts.
5) Develop an inclusive research community
Using value-laden language(as ‘shithole country’,
‘institutional void’) not only poses an obstacle to
building a collegial and vibrant intellectual community
across peers from diverse cultural backgrounds, it also
threatens the integrity of theoretical development itself.
Thank you for being patient