Uncertain Institutional Environment Research Articles

Identifying the tacit entrepreneurial opportunity of latent customer needs in an emerging economy: The effects of experiential market learning versus vicarious market learning

AbstractResearch SummaryFocusing on latent customer needs as the essential substance of entrepreneurial opportunities, this study examines the determinants of the identification of such opportunities. Based on organizational learning theory, we explore the effects of experiential market learning (EML) and vicarious market learning (VML), and the contingency of such effects on different dimensions of environmental uncertainty in an emerging economy: demand uncertainty of the task environment and legal inefficiency of the institutional environment. The model was tested through survey among 238 firms in China. We find that both EML and VML facilitate the identification of latent customer needs, while they interact with environmental uncertainty in different ways. This study makes substantial contributions to the extant literature on opportunity identification, strategic entrepreneurship, and the origin of entrepreneurial opportunities.Managerial SummaryLatent customer needs, which customers are not aware of or unable to articulate, serve as a catalyst for firm growth and are integral to the business model design. How can firms identify such essential entrepreneurial opportunities? We investigate this question in an emerging economy in which latent needs are more frequently encountered and find that both learning from direct market experience (EML) and learning from other firms' market experience (VML) increase the likelihood of identifying latent needs, while VML is more influential than EML. Facing high demand uncertainty, firms should rely more on VML than EML to identify latent needs, whereas in an uncertain institutional environment with a weak legal system, firms should place less emphasis on VML and more on EML in the identification of latent needs.

The Influence of Institutions on Variation in Innovativeness of Small Businesses and Occupational Structure: A Case Study in Sri Lanka

Growth of the Sri Lankan economy in the last three decades, according to published data, is uneven or spurious. Even though internal and external shocks have been cited as reasons for this uneven pattern, it is unlikely to explain huge continuous variation in economic growth in recent years. Also such variation may not supported by the statistics in occupational structure of the country. But in other countries such as India and European countries economic growth has strong relationship with the occupational structure. Economic growth of those countries is characterized by sequential transformation: agriculture dominated economies to industrial economies and then to services economies. Recent research in Europe suggests that economic growth is directly related to innovativeness of small businesses which claims larger share of employment and theorizes that relationship between economic development and entrepreneurship takes U-shape. Entrepreneurship of an economy is represented by the population engaged in productive self-employment. Researchers who support this argument argue that entrepreneurs move along a spectrum of innovativeness. At the lower end of this spectrum lies self-employment for earn a living while the other extreme is occupied by the innovative small businesses. These innovative businesses are operated by individuals who believe that they could earn better income from business than their wage employments. This paper argues that institutional environment could be the major factor which determines the position of small business on the innovativeness spectrum. The basis of this argument is the uncertainty of outcome engaging in small businesses due to uncertain institutional environment. Institutional environment, according to scholars, consisted of political and regulatory, economic and social cultural and technological institutions. Selecting 13 cases after screening 98 cases in different provinces across the country this study found that entrepreneurs who sought small businesses as an earn-a-living stay at the lower end of innovativeness spectrum while other end is occupied by individuals who believe his capability of earning more than a wage employment. In-depth studies of these 13 cases reveal that adopt survival strategies than growth strategies. Wayamba Journal of Management 2013 4(1): 26-41

Innovative public goods production and organizational form selection: a case study of the Wenzhou Private Lending Service Center

This article discusses innovative public goods production and organizational form selection based on a case study of the Wenzhou Private Lending Service Center, which was founded during Wenzhou’s comprehensive financial reform in 2012. We find that the local government granted a company the authority to manage the private lending registration system, which was a new type of public good. However, the company presented certain organizational characteristics of government departments in the production of public goods. Our study suggests that the production of innovative public goods is influenced by an uncertain technical environment or uncertain institutional environment. Local governments will try to reduce possible loss due to high uncertainty from both environments, an important strategy of which is choosing the organizational form that can reduce the risk in production and grasping the control rights of the operation of the organization. This article provides an analytical model for organizational form selection in a multidimensional environment.

Managing Hybridity in a Changing Welfare Mix: Everyday Practices in an Entrepreneurial Nonprofit in Belgium

This article departs from the observation of a widely heralded shift in the governance of welfare, which is claimed to represent a more complex and uncertain institutional environment for third sector organizations (TSOs). It has been argued that hybrid organizations carry innovative potential compared to traditional nonprofits in terms of more effectively or creatively dealing with contradictory pressures from multiple institutional logics. Using a recently developed theory to study nonprofit hybrids, this paper explores the concrete organizational practice of ‘managing hybridity.’ A qualitative study of institutional logics and participant interactions in a purposively sampled ‘post-corporatist’ hybrid TSO in Belgium was conducted. Our analysis first revealed that at the organization-level, our case represented a blended nonprofit hybrid. The particular combination of competing logics, however, put complex demands on staff members, who used three types of coping strategies in their everyday routines. A managerial and service logic prevailed, at the expense of the TSO's participatory and emancipatory mission. Implications of the findings for nascent theorizing on nonprofit hybrids are discussed.

Navigating Uncertainty: The Survival Strategies of Religious NGOs in China

This article looks at the strategies religious non-governmental organizations (RNGOs) with strong transnational linkages use to maintain a continued presence in mainland China. It does so by utilizing neo-institutional theory as an instrument for analysis, with an emphasis on outlining the coercive, mimetic, and normative pressures RNGOs face. One of the key findings of the study is that there is creative circumvention of isomorphic pressures by working with local agents, fostering trust with the local government, and keeping a low profile. Moreover, RNGOs dealt with the uncertain institutional environment in China through staff exchanges, denominational supervision, tapping into global platforms, and undergoing a professionalization process.

Navigating Uncertainty: The Survival Strategies of Religious NGOs in China

This article looks at the strategies religious non-governmental organizations (RNGOs) with strong transnational linkages use to maintain a continued presence in mainland China. It does so by utilizing neo-institutional theory as an instrument for analysis, with an emphasis on outlining the coercive, mimetic, and normative pressures RNGOs face. One of the key findings of the study is that there is creative circumvention of isomorphic pressures by working with local agents, fostering trust with the local government, and keeping a low profile. Moreover, RNGOs dealt with the uncertain institutional environment in China through staff exchanges, denominational supervision, tapping into global platforms, and undergoing a professionalization process.

Firms, public good provision and institutional uncertainty: Evidence from Russia

Enterprises in post-socialist and transition economies often participate in providing infrastructure and social services to the surrounding community which in the Russian legal setting should be local authorities’ responsibility. We propose that this bundling of social and infrastructure goods provision with firm's core operations is a fully rational choice in an uncertain institutional environment. A unique survey data suggest that this manifests itself through more reliable infrastructure, stronger employee attachment to the firm and, most interestingly, through better relations with the authorities. Relationship with authorities is a two-way game where the firm gains from the arrangement but on the other faces sanctions if it decided to depart from it. Firm's participation in the arrangement is clearly enhanced by inherited fixed capital assets from the Soviet era.

Environment, governance, controls, and radical innovation during institutional transitions

Researchers pay only limited attention to the problem of drive force of radical innovation in institutional transitions, especially in China. Drawing on both institutional theory, managerial control theory, and innovation theory, this study examines the roles of external and internal drivers to firms’ radical innovation. Specifically, we examine the effects of external institutional environment and internal corporate governance on radical innovation by introducing management control systems. Based on data from a sample of 585 firms in China, this study finds that the effect of institutional environment uncertainty on radical innovation is significant but formal corporate governance is not. These results suggest that firms facing an uncertain institutional environment emphasize both financial control and strategic control, and firms that have adopted formal corporate governance prefer strategic control to financial control. The implications of these findings for research during institutional transitions are discussed.

Self-employment in urban China: Networking in a transition economy

This paper investigates the relationship between self-employment and social networks in urban China, an economy rife with informational and institutional imperfections, under-developed financial markets, but a growing and important non-state sector. Having a social network can help the self-employed access supply and credit networks, and assist in navigating an uncertain institutional environment where permissions and licenses often require inter-personal relationships to facilitate and reduce the informational costs of enforcement by dealing with known persons. Thus, holding other productive and observable traits constant including attitude toward risk where possible, social networks are expected to be a significant correlate to self-employment which is borne out by the evidence. Examining three tranches of the self-employed (those who are self-employed, those who are self-employed as a second job, and a sub-sample who have experienced unemployment and then became self-employed), the paper finds that social networks significantly predict self-employment except for those who are working for themselves as a second job. Gender differences are also notable.