Bridging Institutional Voids at the Urban Base of the Pyramid

Abstract

Much of the BoP literature has focused on rural settings, yet urban poverty is rapidly growing in scale and importance. The urban poor in developing countries inhabit informal settlements characterized by significant institutional voids. This paper examines the strategies used to address these voids by companies that operate in such settings, through in-depth comparisons of the approaches used by three companies providing basic services in a major emerging-country metropolis. The paper shows that institutional voids at the urban BoP are characterized by their instability, diversity, and incompleteness. In this context, companies have no choice but to engage in institutional entrepreneurship to bridge the unfilled voids and to bring some stability and uniformity. In Rio de Janeiro, some utilities are attempting to do so through a combination of technology, which offers a stable and uniform basis of operation, and the engagement of multiple stakeholders along the lines of the collaborative governance concept. In order to implement these actions, however, the companies first have to gain a measure of legitimacy at the local level, overcoming the liability associated with their outsider status.