Thin on the Ground: A behavioural Explanation for MNEs’ Entry into the Base of the Pyramid Markets

Abstract

Research indicates that the Covid-19 pandemic can nullify decades’ worth of progress made on several developmental objectives including poverty alleviation. For the first time since the 2008 financial crisis, the GINI coefficient: an index for income inequality, worsened by 6 percent for developing countries and another 70 million people are likely to be pushed into extreme poverty. This impending developmental crisis, calls for renewed research and managerial focus on market-based approaches to poverty alleviation. Building on prior research, we argue that the decision of Multinational Enterprises (MNEs) to enter Base of the Pyramid (BoP) markets can have positive externalities for development and poverty alleviation. But only a small number of MNEs are able to overcome several external and internal challenges associated with BoP markets. Using a behavioural lens, we propose and highlight the importance of internally generated resources in facilitating innovations and BoP market entry. While constraints due to structures and processes remain, slack resources allows room for experimentation and even bypass some of these processes and demonstrate the power of the ideas, before formally following the structured innovation and entry processes. We empirically test this explanation with a unique dataset of innovations and BoP market entry. We conclude by drawing insights for research in BoP markets as well as managers and policymakers to incentivise MNEs to participate in regional development.