Abstract
To encourage new research on the role of institutions in the entrepreneurial process in less developed countries (LDCs), the authors propose a conceptual framework to investigate concurrent institutional constraints. The authors define these constraints as geopolitical contexts that encounter simultaneous challenges to well functioning formal and informal institutions. Systems of stronger institutions compensating for weaker institutions are hampered in these settings and such systems weigh heavier on local entrepreneurs and further challenge their ability to mobilize resources and access market opportunities. By investigating the extreme operating conditions of these settings, scholars gain a deeper understanding of how entrepreneurs confront operational dilemmas and express agency through engaging with bricolage and cultural entrepreneurship. To animate these proposals, the authors consider a case illustration of a venture operating under such constraints.
Keywords
Informing the “rules of the game” within society, formal institutions provide supra-structure for enterprise by defining the parameters of market pursuits, resource acquisition, and property rights protection, while informal institutions specify the relational conventions, habits, and customs that allow for behavioral predictability within the transactions that underlie enterprise processes (Biggart & Beamish, 2003). In isolating country-settings into formal and informal institutions, scholarship has revealed significant cross-national variation in the level of efficiency, and the relative efficacy, of institutions (Abdi & Aulakh, 2012; Aghion, Algan, Cahuc, & Shleifer, 2010; Bruton, Ahlstrom, & Puky, 2009; North, 1990) in their ability to guide enterprise. For instance, international business scholars have often depicted developing countries per their institutional voids (Khanna & Palepu, 1997, 1999) to account for relative macro-level gaps in national governance systems when compared with more advanced economies (Godfrey, 2011; Khanna, Palepu, & Sinha, 2005). However, the study of institutional voids has disproportionately emphasized the strategies adopted by resource-endowed multinational enterprises (MNEs) (Meyer, Estrin, Bhaumik, & Peng, 2009; Murtha & Lenway, 1994) and how they wield or overcome relative deficiencies in formal institutions (Gond, Palazzo, & Basso, 2009; Luo, 2010).
The literature’s concentration on the challenges posed to MNEs when confronting lacking formal institutions is not inherently problematic, but the view as seen from the ground by indigenous entrepreneurs from less developed countries (LDCs) has been underrepresented (Valente, 2012). Not only does this view more aptly depict the majority of enterprise pursuits in LDCs (Bosma & Levie, 2009), but it also reveals a key piece of understanding of how or when institutions guide, versus impose, boundary conditions on enterprise activities occurring through entrepreneurship (Naude, 2011). Thus, in departing from the views seen and roles occupied by MNEs (Luo, 2010; Scherer & Palazzo, 2011), the authors redress the concept of voids and conceptualize the role of the institutional environment given the constraints posed to formal and informal institutions, such as those found in the extreme operating environments of various LDCs. Specifically, this article (a) conceptualizes how institutional constraints within LDCs acutely challenge local entrepreneurs, and (b) illustrates how entrepreneurs survive extreme settings through bricolage and cultural entrepreneurship strategies.
With specific relevance to LDCs facing more extreme operating conditions, this article provides at least two key contributions to research on how institutions guide entrepreneurship. First, the authors present a means to further the study of varying levels of institutional quality by conceptualizing concurrent institutional constraints. Expanding prior literature on the consequences of institutional voids, this article is of both theoretical and practical relevance to the study of entrepreneurial processes inasmuch as it offers a more nuanced understanding of how entrepreneurs—who lack access to the most basic resources and market opportunities—are able to persist. Second, this article elucidates how the theoretical concepts of bricolage and cultural entrepreneurship offer strategies to overcome these constraints. Given the disproportionate emphasis on the MNE’s perspective at the interface between business and society (Scherer & Palazzo, 2011), this article enhances these contributions by placing focus on the view of enterprise as seen by the local entrepreneur.
The remainder of this article is presented in four sections. First, the authors define the features and the challenges of concurrent institutional constraints. Second, the authors consider how the perspectives of bricolage and cultural entrepreneurship can explain the means by which local entrepreneurs strategize vis-à-vis such constraints. Third, in accounting for these perspectives, the authors develop a case illustration of a young olive oil enterprise that confronts concurrent institutional constraints in its entrepreneurial pursuits within the ongoing extreme operating conditions of the occupied Palestinian territories (oPt). In the interest of furthering the study of such settings, the article concludes with a discussion of future research opportunities.
Concurrent Institutional Constraints
The concept of institutional voids has been used to characterize the macro-level country conditions that lead to a deficiency in formal institutions, such as national governance systems (Khanna & Palepu, 1997). More specifically, the concept refers to the “absence of specialized intermediaries, regulatory systems, and contract-enforcing mechanisms” (Khanna et al., 2005, p. 63). Indeed, as Khanna and Palepu (1999) observe, “when institutional mechanisms are underdeveloped or missing, transaction costs rise, and the economy’s scope and growth is limited accordingly” (p. 126). Thus, with ineffective or corrupt governance systems and lacking property rights regimes within LDCs, formal institutions fail to promote enterprise (Aghion et al., 2010; Khoury & Peng, 2011; La Porta, Lopez-de-Silanes, Schleifer, & Vishny, 1999).
In these situations, it has been proposed that enterprise is a social endeavor and is more commonly guided by compensating informal institutions or relational mechanisms of economic exchange (Biggart & Beamish, 2003), such as the use of cultural conventions, family and political connections, or other forms of context-specific contracting (Assaad, 1993; Chakrabarty, 2009; Cross, 1998; El-Said & Harrigan, 2009; Miller, Lee, Chang, & Le Breton-Miller, 2009; Webb, Tihanyi, Ireland, & Sirmon, 2009). This notion of informal relational conventions compensating for ineffectual formal governance systems has also been proposed to represent how entrepreneurs survive in other dynamic institutional contexts, such as transition economies (Puffer, McCarthy, & Boisot, 2010; Steer & Sen, 2010). In many LDCs, the ability for informal institutions to compensate for lacking formal institutions may occur with reasonable predictability, consistency, and stability, but there exist more extreme operating conditions within various LDCs where this system is compromised, leaving the co-occurrence of hindered formal and informal institutions. These settings challenge the presumption that informal institutions operate unhindered in the absence of robust formal institutions as a compensatory system to yield a functionally stable institutional environment that is capable of fostering and sustaining entrepreneurship (Mair, Marti, & Ventresca, 2012). Failure in compensatory systems significantly thwarts the development of markets and opportunities.
To explore enterprise pursuits under extreme operating conditions, the authors define concurrent institutional constraints as institutional environments in which formal and informal institutions are dually compromised and, thus, stronger institutions are less capable of compensating for weaker institutions (Steer & Sen, 2010). Country environments with formal institutional constraints can be represented by numerous conditions including ineffectual rule of law, government corruption, exploitation of public funds/resources, the selective application or enforcement of law, inequitable systems of justice according to group-affiliation, limited access to education or public benefits, constrained civil liberties, restricted international trade or market-entry, presence of state-controlled media, or the ongoing risk of political hazards.
Institutional constraints are also compromised by an inability for informal institutions to be fully and consistently enacted, such as when there exist restrictions around social engagements or behaviors, collective organization and demonstration, free speech, or designated boundaries to occupational pursuits according to race, gender, religion, family, or nationality. Sharply affecting enterprise, concurrent constraints limit individual autonomy (Mair et al., 2012), and without autonomy, there exist threats to individual security and geospatial mobility both within and between country borders (Moser & McIlwaine, 2006).
Thus, with the presence of concurrent institutional constraints, there are fundamental challenges to enterprise in terms of accessing critical resources and markets—an outcome that weighs heavy on entrepreneurs. Entrepreneurs operating under these conditions may find greater struggle relative to more established organizations insofar as there is less protection against the expropriation of start-up-critical resources, a lacking property rights regime, and less ability to depend on informal institutions, such as the ability to rely on predictable cultural norms and social conventions within business exchanges. In contrast, such norms and conventions are commonly present and actively functioning within enterprise when informal institutions are not undermined. However, when culture-specific behavior—such as that commonly expected within the conventions of typical social and economic exchange—cannot occur with predictability, stability, consistency, and meaning, the role of informal institutions within enterprise is less certain (Biggart & Beamish, 2003).
When concurrently present, these constraints threaten individual autonomy and, in turn, pose mobility challenges. Limitations to individual autonomy can occur when a state’s formal institutions cannot guarantee an individual’s basic security, such as under conditions of dictatorship/authoritarianism, political corruption, military-based rule within government, foreign occupation, asymmetrical systems of justice, or entrenched separatist policies. Analogously, informal institutional constraints occur with the collective monitoring and enforcing of rules that limit the experiences, travels, property rights, and relational interactions within and between specific groups of individuals, such as limitations on the interaction within or between cultures in which gender, ethnicity, family history, or religion sharply dictate the systems of social exchange. Such informal institutional systems may be constraining according to their own rules, but when interfacing with formal institutional constraints, existing restrictions on informal institutions are further exacerbated.
Although their antecedents can be explained by histories of harsh conflict and societal crisis (i.e., extreme poverty, foreign aid dependencies, or health/food security), both formal and informal constraints are commonly present in more extreme operating environments, and the limitations to individual autonomy are present when such constraints co-occur with one another. Combining constraints, there can exist atrophic development consequences in many LDCs because, historically, enterprise in these settings is a conditionally social endeavor (Woolcock, 1998). Thus, without the presence of protective intervention or basic systems of qualified justice—either formally through political and legal institutions or informally via culture components or through mutualism—to deter unlawful behavior, the autonomy of an entrepreneur is at risk of being undermined (Goodstein & Velamuri, 2009). This condition leaves high uncertainty as to the process of recourse when property rights or enterprise-specific investments have been misappropriated and further prohibits the autonomous actions of the entrepreneur. Restricted autonomy encumbers individual mobility, and, in turn, the essential freedom to travel within or between country and other meaningful geospatial boundaries is thwarted. This restriction challenges the permissive transport of cargos—a central activity within the exchange of durable goods (Amnesty International, 2010; Bornstein, 2001). Moreover, the personal safety and well-being of individuals when conducting economic exchanges through social engagement, or prioritizing enterprise-critical tasks, cannot be consistently guaranteed and entrepreneurial pursuits are unavoidably less clear (Roy, 2004).
Most fundamentally, the informal institutions that should be available to compensate for failures within the formal institutional environment are not capable of efficient operation when the entrepreneur’s autonomy is limited. This situation can challenge the predictability of enacting features of culture or codified norms in that the conventions of whom the entrepreneur contracts with or the ability to leverage embedded social features within exchange are not fully realizable. Within LDCs, this situation adds greater uncertainty, such as with respect to more nascent ventures (Khoury, Junkunc, & Mingo, 2012), in terms of how to proceed in contracting relationships when formal institutions are already compromised. Thus, the authors propose that concurrent institutional constraints are present when “fallback” informal institutions cannot viably compensate for failed formal institutions.
Entrepreneurship Lenses and Concurrent Institutional Constraints
In considering contemporary theories of strategic entrepreneurship (Alvarez & Barney, 2005; Hitt, Ireland, Sirmon, & Trahms, 2011), various perspectives could benefit from empirical investigations within regions marked by concurrent institutional constraints (George, McGahan, & Prabhu, 2012). However, the authors contend that two theoretical perspectives of entrepreneurship are particularly valuable to studying how entrepreneurs strategize amid concurrent institutional constraints within LDCs, as these views place critical value on the entrepreneur’s perspective of a particular situation or context (Welter, 2011). These views are captured by the concepts of bricolage (Baker, Miner, & Eesley, 2003; Levi-Strauss, 1966) and storytelling through engaging in cultural entrepreneurship (Lawrence, Hardy, & Phillips, 2002; Lounsbury & Glynn, 2001; Martens, Jennings, & Jennings, 2007). The authors review these two theories to give some consideration of entrepreneurship under extreme operating conditions.
Bricolage
Acclaimed anthropologist and ethnographer Claude Levi-Strauss (1966) conceived the notion of bricolage to refer to situations where one “makes due with the resources at hand” in working toward an outcome. This concept presents a more cognitive, first-person perspective of the entrepreneur’s view of resources and opportunities. Take the bricoleur case of a grape farmer: with access to a certain soil composition, climate, and sunlight exposure, the farmer would be constrained as to the variety and the quality of grapes that could be produced. In the interest of approaching a market, the farmer could either work within her or his financial means to cultivate the soil to support a broader variety of grapes or farm a more readily available variety.
In its recent application to the field of entrepreneurship, the concept of bricolage refers to “making due” with available resources toward the creation of a new product or market opportunity (Baker et al., 2003; Garud & Karnøe, 2003). 1 This view of entrepreneurship is contrasted with the more classical strategic design of “seeking and acquiring” the resources necessary to realize opportunities (Shane & Venkataraman, 2000). However, such classical representations of the entrepreneurial process may not comprehensively depict the extreme operating conditions with LDCs where institutions of varying robustness challenge the first-person assessment of prospective opportunities and their corresponding opportunity costs. In accounting for representative challenges posed by concurrent institutional constraints, Table 1 presents some basic examples of how typical conventions of resource and market opportunities are challenged prior to (ex ante) and following (ex post) start-up. Germane to entrepreneurs facing such challenges (Mair & Marti, 2009), bricolage emphasizes the constraints on resource access amid compromised institutions (Baker, Gedajlovic, & Lubatkin, 2005).
Examples of Entrepreneurship Challenges Encountered Amid Concurrent Institutional Constraints Occurring Ex Ante and Ex Post to Start-Up.
Simultaneous gaps in both formal and informal institutions created by concurrent institutional constraints impose an acutely harsh limitation not only on the resources available for acquisition but also on the penultimate choices available to entrepreneurs engaging in bricolage. Thus, the assessment of opportunity may only occur when the entrepreneur has reconciled the uncertainty prompted by a flawed institutional environment versus the strategic choices available to shape their entrepreneurial trajectory (Baker et al., 2005). In accounting for the resources at hand for the entrepreneur, their unique mind-set may represent a resource-based advantage at the most basic level in that the entrepreneur may be distinctively poised to confront opportunities (Autio, George, & Alexy, 2011). Hence, this condition represents the initial starting point for the entrepreneur. Indeed, the entrepreneur must reconcile the features (Peredo & McLean, 2013), flaws, and obstacles within either institutional environment, which can influence the entrepreneur’s ability to recognize or embark on perceived opportunities (Khoury, Cuervo-Cazurra, & Dau, 2014). However, because the notions of risk, legality, wealth maximization, control, and social boundaries are embedded within informal institutions (Baumol, 1990; Webb et al., 2009), entrepreneurs in LDCs often begin with a preexisting set of constraints in terms of which markets are available and attainable—constraints that must be negated well before even considering which entrepreneurial processes that allow them to enter these markets.
Enterprise pursuits require the need to engage in various negotiations, contractual arrangements, and sales-activities. In many LDC environments, either due to confronting limited access to remote communication technologies or to the cultural programming of needing to deal according to face-to-face social conventions, entrepreneurs often attempt to economize their transactions by dealing within in-group networks (Assaad, 1993), such as familial or kinship-based connections. This approach allows for the dependable cultural norms of social capital, honor, face, and long-term relationship investment to ensure more predictable and trustworthy contractual commitments. As noted earlier, such informal institutional systems offer fallback contracting mechanisms for incomplete formal institutional governance (Peng & Khoury, 2009). However, when considering that concurrent institutional constraints present a series of autonomy and mobility challenges, such common features of contracting through informal institutions may be suspended as there exist mobility-based challenges in physically accessing partners or customers who are more readily available and already vetted through one’s cultural guides. Thus, the meaning and universal interpretation of cultural norms within transactions are not consistently available to LDC entrepreneurs and the cultural conventions of what constitutes a realistic aspiration or the understanding of how much control entrepreneurs have within their means are fundamentally challenged and potentially unclear with respect to the entrepreneurial process.
Also affecting the autonomy and mobility of entrepreneurs are the context-specific challenges that commonly represent more extreme operating environments in LDCs. These may occur in various forms, such as food insecurity, foreign aid dependency, separatist policy, economic crisis, or civil or cross-border war. The confrontational reality of such country situations captures the living conditions in which entrepreneurs must seek to make due with limited resource and opportunity access. These oppressive and ongoing hardships further complicate the challenges imposed by concurrent institutional constraints where the entrepreneur facing severe and constantly changing obstacles must cultivate improvisational capabilities to survive (Mair & Marti, 2009). With fewer viable strategic choices in these settings, the capability to use adaptable improvisation as a bricolage strategy may offer the most valuable tactic that these entrepreneurs can leverage under such compromised living conditions. In sum, the authors propose that when both formal and informal institutional constraints exist, the concept of bricolage aptly depicts the enterprise strategies used by entrepreneurs as the interpretation of what is within their means can account for the first-person view of (a) access to valuable resources and relationships and (b) the feasible market opportunities that can be reached with such constrained access.
Storytelling Through Cultural Entrepreneurship
Building on the assumption that a context-specific “cultural component” can be leveraged within entrepreneurship, the authors also explore the application of cultural entrepreneurship, which Lounsbury and Glynn (2001) define as “the process of storytelling” that entrepreneurs engage in so as to obtain legitimacy or other forms of critical capital that are necessary to acquire and mobilize resources toward enterprise pursuits (p. 545). In acknowledging the contingent value and the need to tell stories that help convey an entrepreneur’s challenges to realizing market opportunities, it becomes apparent that the venture’s operating environment can inform the fruitfulness of a story in helping realize important outcomes. Thus, under more extreme operating conditions within LDCs, where concurrent institutional constraints are present, stories of these severe challenges and daily hardships help convey the entrepreneur’s resilience and perseverance to survive (Dacin, Dacin, & Matear, 2010; Seelos & Mair, 2007).
Storytelling in these settings commonly adopts a narrative of the entrepreneur’s personal struggle to overcome both resource and market access challenges within an uncertain institutional environment. Furthermore, the spread of the entrepreneur’s narrative within its location and elsewhere provides a credible signal to active or prospective enterprise partners and customers to work with the entrepreneur. This signal occurs through extending legitimacy to the entrepreneur through having either a firsthand understanding or a self-interested awareness of the life challenges faced by the entrepreneur as a resident within an extreme operating environment. Thus, the entrepreneur’s struggle is appreciated by resource providers more directly through a shared commiseration with their struggle or more indirectly through others empathizing with or perspective-taking from the entrepreneur’s view.
Evidence of storytelling is apparent in various durable goods markets, such as within the marketing of fair-trade products—such as limited production crafts, chocolates, and coffees that are sourced or made in LDCs. In these markets, farmers and producers in the poorest areas of the world are able to find product-markets in countries that can support more elaborate supply-chains or difficult-to-source products in remote locations. The presence of using storytelling within emerging economy entrepreneurship can also be observed in settings where microlending serves as a means of fostering local enterprise (Quisumbing & Pandolfelli, 2010). In the case of microlending, empathy for the stories of struggle, oppression, and limited freedoms can lead to opportunities to access start-up or growth capital (Prahalad, 2005).
The determined value and strategic use of stories when concurrent institutional constraints exist is context dependent. For instance, stories of resilience and overcoming trials of hardship may be more valuable when such stories are comparatively rare and differentiated from those of peer entrepreneurs or ventures. For local entrepreneurs in pursuit of more proximal or regional market opportunities, their stories may hold less value to local customers and enterprise intermediaries due to the common understanding of the shared hardships and challenges posed by concurrent institutional constraints as these challenges are similarly confronted by most other local residents.
Conceivably, stories of overcoming struggle can help inspire more local entrepreneurship and enhance the ability to obtain legitimacy and gain access to resources. This outcome is catalyzed by getting those outside of an extreme operating environment to recognize the achievements and to invest more in that region’s entrepreneurs. For instance, when such entrepreneurs are pursuing markets outside of their geopolitical environment, their stories may earn them a badge of entrepreneurial wherewithal and perseverance. Products or firms that are able to convey their stories in these markets may be able to penetrate those with supportive values and those sympathetic to related causes to purchase products (i.e., like-minded consumers) or engage in business with firms (i.e., like-minded suppliers) originating from countries facing concurrent institutional constraints. In short, the entrepreneur’s environment becomes part of the product, and the story illustrates the social context in which entrepreneurship occurs (Dacin et al., 2010). Accordingly, the theoretical concept of cultural entrepreneurship can be leveraged to study how and under what conditions the entrepreneur’s story matters to creating and fostering opportunities amid concurrent institutional constraints. Thus, enterprise strategies can be constituted by leveraging the narrative of overcoming institutional constraints within extreme operating environments.
Illustrating Entrepreneurship Amid Concurrent Institutional Constraints
The relevance of either theoretical lens is dependent on the depth and the type of institutional deficiencies faced by entrepreneurs within a specific context or region of study (Peredo & McLean, 2013; Welter, 2011). In an attempt to illustrate the challenges introduced by concurrent institutional constraints, it is critical to consider the ontological view seen by local entrepreneurs and institutional actors within LDCs (Khoury et al., 2014). This perspective is particularly valuable as the vast majority of work on institutional voids and challenges center on the formal institutional environment and how gaps in governance create or constrain market opportunities. The relatively more challenging scenarios faced by the LDC-based entrepreneurs from both formal and informal institutional constraints have received limited scholarly attention. Thus, there exists an opportunity to inform the theoretical puzzle of how entrepreneurs confront the entrepreneurial process to gather, mobilize, and deploy resources toward the pursuit of market opportunities when encountering such constraints.
Although concurrent institutional constraints can occur in various LDC settings, it is important to acknowledge that the underlying evidence of these constraints is ultimately idiosyncratic to the particular context. For instance, LDCs face differing types of formal institutional constraints depending on the level of government stability or corruption, political hazard risk, polity, rule of law, property rights assignment, fairness in the court system, or access to education and other public benefits. Lacking formal institutions are more commonly represented as de facto features of the least developed countries; yet, the manifestation of concurrent institutional constraints may be region-specific, spanning from the village to country levels of institutional analysis. Modern depictions of limited autonomy per concurrent institutional constraints can occur through the presence of uncontrollable gang violence (i.e., Ciudad Juarez and other Mexican-border towns), ongoing ethnic conflict (i.e., Democratic Republic of the Congo), unfolding civil and political unrest (i.e., current Syria; the 2000 civilian coup d’état in Fiji), or ethnic-divided extremism (i.e., the 1994 genocide in Rwanda). Furthermore, instances of apartheid or separatist policies (i.e., South Africa) and foreign occupation (i.e., occupied Palestinian territories) also present challenges for institutions to thrive, while also placing basic individual autonomy and the rights to citizen voice, dignity, and control of formal institutional elements exclusively within the occupier or oppressive government’s hands. These illustrations show the diversity of settings where severe hardships undermine the autonomy of local entrepreneurs. However, in an effort to present a richer case illustration of our theoretical proposals, the authors use the conditions of occupation to further explore entrepreneurship under the concurrent institutional constraints.
Case Illustration of the Occupied Palestinian Territories
In this section, the authors provide an analysis of the contextual features of a country setting that animates the presence of concurrent formal and informal institutional constraints and extreme operating conditions—the politically problematic and ideologically complex region of the occupied West Bank. This area represents one of the two geographical zones (the other being the Gaza Strip) that comprise the oPt, which is occupied by Israel. 2 The methodology in support of the case illustration is now presented.
Case Illustration Methodology
One author collected primary field data in the oPt in multiple stages. 3 First, in 2009, extensive ethnographic, archival, and interview data were collected to understand the interface between entrepreneurs and their institutional environment throughout areas in the occupied West Bank. Through this initial process, the author interviewed 42 informants—namely entrepreneurs, small business owners, residents, and members of government organizations at different sites in the West Bank and Israel. 4 Interviews took place in both large cities like Ramallah, Nablus, Jerusalem, and Tel Aviv, and in various small villages. The voice-recorded interviews were subsequently transcribed, which generated more than 600 pages of single spaced verbatim text. Primary documents from the sites visited were also gathered in an effort to achieve triangulation (Jonsen & Jehn, 2009). In the second stage of primary data collection, email communications and interviews were conducted with the founding entrepreneur of the case’s focal organization based on themes that emerged from analyzing the first round of interview data. Finally, in 2013, the same author returned to the oPt to conduct follow up face-to-face interviews with several informants, including the entrepreneur of the case’s focal organization.
The interview data were analyzed in three stages. In the first stage, preliminary data analysis was conducted while the author was in the field in an effort to discern the ongoing themes that were emerging in the data collection process. Following recommendations for grounded theory coding per Van Maanan (1979) and Charmaz (2006), in the second and third stages, first-order and second-order concepts were developed to examine the ethnographic “facts” of the study and to connect these facts to “theory.” The primary data in support of the case illustration are drawn from this research process.
Contextualizing Formal and Informal Constraints in the oPt
To gain an intimate understanding of the institutional environment and the key obstacles confronting enterprises in the region, the authors animate the conceptual framework by incorporating the perspectives of key government actors and the founder of an entrepreneurial enterprise in the region that will be the subject of the case illustration. These views are supplemented by archival reports on entrepreneurship within the country setting according to development-based reports (Abdelnour, 2013; Bosma & Levie, 2009; Rjailah & Srouji, 2013).
Enterprises in the region encounter numerous operating challenges (Honig, 2001), which they must successfully navigate to survive. Such challenges are vast given the large and significant gaps present in the formal institutional constraints due to the occupation. As the setting of the Palestinian–Israeli conflict, the oPt represents a region under military control (by the Israeli Defense Forces [IDF]). Daily struggles for access to people, resources, and employment exist given that Palestinian mobility is constrained at border entries/exists. This issue is further exacerbated by the ongoing but internationally unlawful proliferation of new Israeli settlement communities (and uprooting of preexisting Palestinian communities) beyond the 1967 borders, which is well documented by the United Nations Commission of Human Rights and International Humanitarian Conventions and the International Committee of the Red Cross (ICRC) (Cohen, 2005; Ghannam, 2000; ICRC, 2009; Koutroulis, 2012; Kretzmer, 2012; Said, 1979/1992). 5 Representing the oPt, the Palestinian National Authority (PNA) lacks explicit ownership of many formal institutional systems, such as the assembly of defense forces, control of tax revenue, establishment of an international airport, and control of many public utilities. The state has an intended constitution to support a future Palestinian state, but lack the sovereignty to implement various policies at the state level or expand the scope of its formal institutions to fulfill several political and legal governance responsibilities. For instance, a court system with the ability to enforce rulings is currently nascent at best in the oPt.
With respect to land and property rights challenges, a large portion of Palestinian farmers face the risk of land misappropriation by Israel’s ongoing expansion of illegal settlements (Skinner, 2012), new military checkpoints, and its recent efforts to construct what it ideologically refers to as a “security wall” throughout the area (Hareuveni, 2011; Prasad, 2014b; Roy, 2004). In addition, current Palestinian dwellers are sometimes unable to produce the deeds and supporting paperwork to prove the history of multi-generational family ownership (Roy, 2004; United Nations News Service, 2011; United Nations Security Resolution 242, 1967). Final jurisdictions on land rights fall under the Israeli legal system, which places individuals’ verdicts in the hands of the occupier’s legal institutions (Cohen, 2005). Although flexible land-management systems, such as cooperative or crop-sharing arrangements, are growing, in many cases, a farmer’s access to land resources is due to other villagers fleeing the distraught region (Roy, 2004). Thus, the entrepreneur’s selection of what market opportunities to pursue are based on which crops can grow on farming lots that become available through the evacuations or emigrations out of the region by others.
With the occupation, the IDF has frequently imposed ongoing house-arrest, curfews, lengthy school closures, and border closures between villages and the Israeli border, and the misappropriation of land and home demolitions despite international calls to halt such activities when land documents are unable to be furnished by existing Palestinians (Bornstein, 2001; Roy, 2004; Said, 1979/1992). Relief organizations, such as ICRC, the Palestinian Red Crescent Society and the United Nations Relief and Works Agency (UNRWA), manage a large majority of the schools, health care, food security, and social welfare typically administered by government. Compounding these labor force and social concerns are a lack of access to skill-based training and increasing illiteracy rates.
Spatially, the regions that constitute the oPt appear as an array of noncontiguous islands within Israel, where short distances of 10 km between villages can often take an entire day to pass through because of the large quantity of mobility-constraining military checkpoints imposed by Israel (Amnesty International, 2010; Bornstein, 2001; Roy, 2004; U.S. Department of State, 2010).
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Various contingency measures are necessary for enterprises to get access to enough suppliers within as many villages as possible to maintain basic operations and overcome Israel’s imposition of curfews, blockades, and daily road closures, and the overall lacking transportation infrastructure (Amnesty International, 2009, 2010; Hareuveni, 2011; Roy, 2004; United Nations News Service, 2011). In a detailed assessment of the military checkpoints and close monitoring of people and cargo in the region, Parsons and Salter’s (2008) account that, “the Palestinian population is defined, constructed, and policed through Israeli authorities of identification. The [Israeli-imposed] closure regime governs the movement or mobility of the Israeli-defined Palestinian population” (p. 719). In an interview that connects this constraint to entrepreneurial endeavors, one government minister of the PNA promptly focused on the inability for enterprise to develop in lieu of the individual autonomy challenges posed by the occupation. With great candor, he explains the detrimental consequences associated with stringent restrictions on mobility: The major problem in general [for business] is from the occupation from Israel . . . movement of goods is limited. The people, the movements of the people, are also limited. We still have now more than 600 closures, the streets, the highways . . . the West Bank is closed! So, [doing business] takes more time and more cost.
A director of a governmental agency, focused on regional business development, echoed these sentiments when he states, The first major obstacle that the Palestinians face in every walk of life, not only in industry and trade, is the occupation. If somebody else told you something else, they would be very wrong. Occupation is the main obstacle to any development in any society. If you are occupied, then you are not allowed to develop, at least in the way that you think is best for you. You are being controlled by foreign powers that impose on you what they think in their vested interest, not on your own interest, or not even in the common interest, you see. So, our economy is largely controlled by Israel. Because physically they control the borders; they control the entry and exit of goods; they control our movements. Inside, even with our territories and they control the money—how it is usually deployed, how do you invest, what you are allowed to invest in and you are not allowed to invest in, what are the strategic industries you are allowed to invest in and what are the strategic industries you are not allowed to invest in.
Parsons and Salter (2008) and Prasad (2014a) observe that, under the guise of what is often deemed as a security measure, the state of Israel is able to create and legitimize the meta-system of colonial occupation. This occupation includes ongoing “violence, destruction, and physical division” and is constituted by “concrete and metal, including checkpoints, prisons, settlements, settler roads, walls, ‘security zones,’ tanks, tractors, bull-dozers, drones, and bombs” as well as “paper and digital permits, ID cards, databases, surveillance systems, visas, evacuation orders, legal notices, applications, vouchers, deeds, and related techniques of classification and categorization” (Abdelnour, 2013, p. 3). Thus, based on the occupation, there exists a formal system of controlling what individuals can move spatially within and between borders to the extent that physical walls are built to separate Palestinians from bordering towns.
However, the conflict also perpetuates an informal system of bias, such as that between transplanted Israeli settlers in disputed areas, and similarly within the oPt according to religion, gender, and age. Within the oPt, there exists a low rate of female participation in the labor force and, with an extremely low overall level of entrepreneurial activity, women are 4 times less likely to take on entrepreneurial pursuits (Bosma & Levie, 2009). Other features of cultural life within the oPt are the emphases of seeking both capital and enterprise advice from immediate family members (Bosma & Levie, 2009). These cultural norms, by default, place the entrepreneur in a challenging position of obtaining the necessary resources to approach market opportunities. Furthermore, when accounting for the informal institutional constraints presented by the conditions of occupation, as families and communities are separated and previously strong forms of social capital are attenuated, the opportunity for informal institutions to compensate for lacking or absent formal institutions is significantly impeded. Entrepreneurs must continuously redefine their strategies to account for the daily emergent challenges in overcoming hardships that are the consequences of the occupation (Bornstein, 2001). Taken collectively, these conditions depict the concurrency of both formal and informal institutional constraints.
Illustration of Entrepreneurial Enterprise: Canaan Fair Trade
Building on the contextualization of the oPt’s various institutional constraints, the authors now analyze entrepreneurship amid extreme operating challenges within the West Bank. By way of illustration, the foci will be on Canaan Fair Trade (henceforth, Canaan), an olive oil production venture started in 2004 in Jenin and its founder, Nasser Abufarha (Wainer & Ferziger, 2011). Jenin is a city of roughly 39,000 with a large UNRWA-administered refugee camp that is comprised of more than 16,000 registered refugees. 7 Despite the location’s history of geopolitical precariousness, Canaan has survived and succeeded. For instance, by its fourth year in operation, it had successfully exported roughly 350 tons of olive oil to buyers (e.g., Whole Foods Corporation) in 10 different countries within North America and Europe and anticipates that this figure will triple in the coming years (Cheslow, 2009; Schneider, 2009). Leveraging primary and archival sources, the authors now investigate how the concepts of bricolage and cultural entrepreneurship can assist in understanding Canaan’s continued survival under extreme operating conditions.
Bricolage in Canaan
Bricolage is largely apparent within Canaan’s supply-chain operations. The venture uses olives grown by approximately 1,200 local farmers, who are organized into 49 cooperatives across the West Bank, to produce olive oil and to export it to international retailers (Carney, 2010). Due to the various challenges that Palestinians face in providing historical property rights deeds and modern legal proof of family ownership, individuals often share access to land resources that present less legal entanglements and fewer threats from being misappropriated (Amnesty International, 2009; 2010; Hareuveni, 2011; Roy, 2004; United Nations News Service, 2011). Thus, Canaan, in acknowledging there exists little legal recourse for Palestinian farmers within the Israeli court system (as a formal institutional constraint), acts within its means to source many of their olives from farms operating under cooperative governance arrangements, versus acquiring raw materials from, what would likely be, more efficient and more accessible source farms. Conceivably, the cooperative farm presents greater transaction costs in terms of the need to dynamically manage more supply-chain relationships, versus using scale economies or buying power to leverage more favorable terms with larger scale orchards. Yet, avoiding supply-chain risk by distributing the access to produce in several locations and farming arrangements per property-misappropriation concerns presents a more predictable means of moving a harvest to production.
The current land boundaries that comprise the oPt are represented by a series of noncontiguous village boundaries with military checkpoints between these and often very awkward travel paths to move, what would otherwise be a very short distance (Parsons & Salter, 2008). Hence, in addition to Canaan’s need to source from lands less vulnerable to property misappropriation through cooperative farm arrangements, they engage in bricolage when selecting produce suppliers per their location. Given the selective scrutiny and uncertainty of being profiled and held up for several hours at military checkpoints between villages, it is common practice to detain or halt the crossing of cargo-transport or shipping vehicles between two occupied geographic zones (Amnesty International, 2010; Bornstein, 2001; Hareuveni, 2011). To overcome product-transportation uncertainty due to the proliferation of, and time imposition from, military checkpoints and the inability to predict the daily availability of transportation routes, Canaan seeks smaller capacity farms or micro-orchards in a variety of locations. With this means of sourcing, Canaan conceivably misses the more economically ideal opportunities to leverage scale economies from working with fewer and larger supplying orchards—a similar outcome as having to work with cooperative crop-sharing suppliers. Thus, working within its limited options, it has conceived a semi-durable and adaptable supplier and transportation network to overcome the ever-changing road closures, and work around the challenges to individual security and mobility. Should a military checkpoint obstruct product or supplier access, Canaan takes efforts to leverage alternate orchards to continue its business activities, therein making due with the situation. Regarding this point, Abufarha (2011) elaborates, We anticipate that our condition [of being] under occupation and the ability to deliver products may be an established objection to new customers, and [we] take that objection on directly before it is raised. In our presentations [to new distributors], we constantly demonstrate our fluid nature and our capacities to be adept with new challenges. We have had to devise plans “A, B, C, D, and E.”
Per the informal institutional constraints, the norms of contracting would favor engaging in familial or kinship-based ties that are represented by the presence of social capital or embeddedness. Driven by diasporas beginning in the 1950s (Said, 1979/1992), Jenin’s large and tightly monitored refugee population—most of whom draw from a family history born in the Haifa and Carmel regions (UNRWA, 2009)—have less ability to leverage work relationships with family-based ties due to city-border mobility challenges. However, in efforts to overcome travel and access constraints as a consequent of military checkpoints throughout the West Bank, Canaan is forced to forge new supply-chain and sales relationships that are less certain and often require a great deal more time to develop. This is because they are less able to leverage preexisting social capital or trust in securing partner relationships. As a result and due to Israel’s occupation, production delays occur from both formal and informal institutional constraints. Informal constraints create the need to forge new and often inefficient relationships with partners that may draw from different cultural norms for transacting. Formal constraints, due to Israel’s often denial, control, and monitoring of all of the oPt’s imported goods (i.e., for packaging materials) and their originating suppliers, cause the incurrence of frequent delays or missed product opportunities from having to rely on overseas suppliers within the supply chain. Although this situation may diminish the overall realizable production capacity and efficiency for Canaan, given Abufarha’s engagement with bricolage, the venture strives to structure time-sensitive production supplies within its cultivated farm-networks to overcome these concurrent institutional constraints.
Further evidence of bricolage is uncovered from looking at the farmers within Canaan’s supply chain, which reveals that many of them work to achieve basic sustenance for their families and are partially compensated with food from the yielded crops (canaanfairtrade.com, 2013). Thus, the compensation sought in many cases is, in part, basic nourishment and food security, to survive the conditions of living under occupation. Based on the evident use of bricolage in Canaan’s operations, this lens helps depict how the enterprise pursuits of managing supply chains and creating production relationships beyond the less costly means of leveraging larger suppliers (with fewer transactions costs and buyer-power scale economies) and forging trust and relational capital with new or foreign partner networks (without the help of preexisting social capital).
Storytelling and Cultural Entrepreneurship in Canaan
Evidence of cultural entrepreneurship through storytelling is more apparent within Canaan’s marketing and sales-distribution networks throughout the venture’s history. From its conception, Canaan used informal, ad hoc systems of distribution through a few (mainly Christian) faith-based organizations that often visited the oPt to engage in relief missions or welfare projects; these organizations also assisted to get small quantities of their products across borders. The stories of entrepreneurial struggle under extreme operating conditions initially sparked foreign market opportunities for those who consumed their products with a social conscience and with the patience and tolerance for late or partial deliveries (Abufarha, 2011). These consumers conferred legitimacy to the venture and helped foster perseverance. Thus, they worked within a distribution network that was ideologically supportive of the Palestinian narrative.
In an interview with Abufarha, he underscores how the marketing of their cooperative-farms not only appeals to groups who share his ideological predilections, but it also allows sellers to provide a very personal narrative behind a product. As he said, “here, the conflict is the main marginalizing condition . . . [by appealing to international consumers sympathetic to the Palestinian human rights cause] we’re turning the conflict into a market advantage.” Yet, Abufarha sees the narrative as an important motivation in several enterprise processes. In his words, it motivates him to “affect positive change in the life of the community you work with and part of that change is one [that] is economic.” However, he also sees his venture as helping present the Palestinian narrative to motivate others to become more aware of their struggles. As summed up by Abufarha: “ . . . so it’s an economic campaign but it is also an informational campaign.”
Motivating the farmers and employees of Canaan to retain pride in their production and to seek high standards for environmentally sustainable and higher yield production is also important in helping convey the presence of quality to be associated with its region of origin. Thus, the narrative of the Palestinian farmers operating under conditions of occupation is not only important to the sales and distribution channels that are sympathetic to the human rights situation, but is also significant internally to the organization. As Abufarha explains, the ability to “create a market for a high quality product from [an] area of conflict . . . empowers the people.” Furthermore, Canaan’s promotional emphasis on social objectives also plays a key role in managing and motivating perseverance within their internal network of suppliers, farmers and employees. Building on the stories behind the farmers, Canaan continues to expand the concept of social and environmental sustainability within their products by adding various unique certifications for fair trade relationships with its farmers and sustainable organic farming practices, and ISO22000 quality certification. These certifications, which reflect the organization’s underlying values, create various means to gain legitimacy not only for the venture, but also for its supporting farmers. For instance, such initiatives incorporate full transparency behind the stories of the products by allowing customers to use product codes to trace the farm of origination and access the stories of the contributing farmers within Canaan’s supply chain (canaanfairtrade.com, 2013). In Abufarha’s words (cf. Carney, 2010), Canaan is not only “economic empowerment for the farmers, but an alternative presentation of Palestine . . . Normally you only see Palestine through the lens of the conflict with Israel. This is a way of showing a response to Israel without violence. To show [that] Palestinian people are still tending the land and farming . . . is how many are responding to the conflict. This is never shown on the television news.”
The narratives of the farmers and the challenges they face in farming their orchards help Canaan engage foreign markets as the challenges of operating under occupation limits any proximal market opportunities in Israel (Amnesty International, 2010). In specifically answering the question as to what purpose these narratives serve from his view, Abufarha stated, “[The stories allows us] to have market access and to raise awareness of the conditions that they [the farmers] are living under. And this awareness helps in relieving some of the pressures from occupation”. Thus, beyond motivating the venture, its farmers, and its distributors, it also helps in promoting the stories of a population with limited autonomy to regions of the world outside of their access due to the presence of concurrent formal and informal institutional constraints.
Discussion
With a more nuanced and finer-grained examination into the entrepreneurial processes within LDCs, this article establishes a theory for how resources are utilized in support of opportunities under extreme environmental conditions, severe resource constraints, and without the clear guidance from institutional architecture. Within such settings, entrepreneurs are not only severely deprived of critical resources, but their available strategic repertoires are greatly compromised to the most basic of strategic options; which are often inefficient or are, at the very least, far from ideal. Using the case illustration of the oPt-based Canaan, an organization that operates under conditions of occupation, the authors uncover severe constraints in governance, basic systems of state security, the ability to enforce the rule of law, or the ability to freely move within and across state borders to leverage relational conventions of contracting. Yet, the mechanisms of bricolage and cultural entrepreneurship represent important approaches for conceptualizing how resources and opportunities are engaged with in such settings.
Overall, this article theorizes on the role of challenged institutions and their effects on LDC entrepreneurs. Although the article’s single-organization and case-setting illustration may limit the overall generalizability of the theoretical proposals forwarded, the authors posit that the two highlighted views provide valuable reference points to investigate the operational processes that contribute to the persistence and survival of LDC entrepreneurs.
Contributions to Scholarship
This article presents two key contributions. First, as a contribution to institution-based scholarship (Casson, Della Giusta, & Kambhampati, 2010), the authors introduce and discuss the concept of concurrent institutional constraints, as a valuable, yet unconsidered area, for future development-based research focused on the emergence of enterprise strategies and entrepreneurship in LDCs in extreme operating environments. This contribution advances the extant literature’s emphasis on how formal institutional deficiencies can be recovered through fallback informal institutions and illuminates how enterprise pursuits can occur when informal institutions are also deficient. Within more extreme operating environments with such constraints, we uncover the challenges to pursuing enterprise with limited individual autonomy.
Second, the authors provide a contribution to future empirical research pursuits by underscoring the potential boundaries of classical representations of entrepreneurial process and highlighting where other theories provide greater descriptive value for LDC-based entrepreneurship. This claim stems from the assumption that when concurrent formal and informal institutional constraints exist, access to resources and market opportunities is also constrained and the willful ability to mobilize the ideal resources necessary to address opportunities is necessarily compromised. With the application of bricolage and cultural entrepreneurship, the theory presented in this article demonstrates how entrepreneurship occurs in LDC settings that face concurrent institutional constraints. To contextualize these theoretical proposals, we use a rare case illustration of an entrepreneurial enterprise from the underrepresented West Bank region of the oPt. With this illustration, the authors also seek to illuminate future empirical opportunities that are available by leveraging these theoretical perspectives and applying them to understudied settings around the world.
Managerial Relevance
In more extreme LDC settings, entrepreneurs represent a higher proportion of new enterprise development relative to established firms and MNEs (Bosma & Levie, 2009); when larger more established firms are present, formal institutional constraints on governance or market regulation can be more easily managed through exploiting or influencing government officials, community leaders, or those with legal powers (Gond et al., 2009; Scherer & Palazzo, 2011). This ability to influence is more readily available to MNEs. However, in adopting the view seen by the local entrepreneur (Khoury et al., 2014; Peredo & McLean, 2013), an actor that is clearly much more disadvantaged when compared with the MNE, this study offers practical relevance to the pursuit of enterprise strategies in LDCs by considering how local entrepreneurs enhance firm competitiveness by overcoming the acute challenges posed by concurrent institutional constraints.
Because such constraints are most typically found within the world’s least developed countries, it is difficult to gain access and learn from these research sites to inform practice. As such, scholarship within such settings has gone largely unaddressed (Prahalad, 2005; Seelos & Mair, 2007) and less can be gleaned from previous research as to how to approach challenges around market and resource access for such entrepreneurs. This article’s conceptual framework clarifies which strategic approaches to entrepreneurship are valuable to confronting the extreme realities faced by local entrepreneurs. A focus on these settings offers LDC-based entrepreneurs an understanding of how concurrent institutional constraints shape, limit, or facilitate the local entrepreneur’s ability to organize resources in pursuit of entrepreneurial opportunities.
Future Research Directions on Concurrent Institutional Constraints
With the aim of encouraging more scholarship in this area, the authors also call for more scholarship on (a) understudied LDC contexts, (b) how entrepreneurs proceed amid concurrent institutional constraints, (c) understanding which actors are valuable to study, and (d) how new entrepreneurial processes emerge in these settings.
Examine entrepreneurship in understudied counties with extreme operating environments
Previous scholarship has underscored the value of studying entrepreneurship in emerging economy contexts (Naude, 2011; Webb et al., 2009). Consistent with the opportunities presented for MNEs operating in such regions, a valuable, yet disproportionate, emphasis exists on larger economies (e.g., China, India, Russia, and Brazil). In such countries, MNEs hold a unique position at the institutional interface between business and society (Luo, 2010; Scherer & Palazzo, 2011); yet, there still remains a significant lack of published literature on how entrepreneurship unfolds in the least developed countries (Bruton, 2010). As such, future researchers should investigate the dynamics of entrepreneurship, including strategies of firm competitiveness in understudied geographical contexts with concurrent institutional constraints, such as in the Middle East, Africa, and Latin America (Abdelnour & Branzei, 2010; Bornstein, 2001; Cross, 1998; Goodstein & Velamuri, 2009; Khoury et al., 2014; Khoury et al., 2012; Lawrence et al., 2002; Mair & Marti, 2009).
Country situations where concurrent institutional constraints and the corresponding limited autonomy are likely to be manifest are often settings where human rights abuses, separatist policies, or conflict engendered by foreign occupation, the rule of gangs or factions, or civil or cross-border wars are commonly present. Within recent history, there exist a multitude of examples that depict such settings—the civil conflicts throughout Lebanon from 1975 to 1990 or Kenya’s preelection spans of violence and intimidation of individuals from 1991 to 2007 capture cases of extreme operating environments. Cross-border armed conflicts, such as the Iran–Iraq war from 1980 to 1988, represent extreme operating settings with constrained institutions and compromised autonomy. Thus, in presenting a means to recognize these contemporary (or historical) country situations in which entrepreneurship remains vibrant in the face of extreme operating challenges, scholars can feasibly gain a deeper understanding of the boundary conditions to which institutions guide the strategies pursued by entrepreneurs and how this guidance translates to development progress occurring at the interface between enterprise and society.
Explore how entrepreneurs proceed amid concurrent institutional constraints
Environments with concurrent institutional constraints typically lack systems of justice or penalties for unproductive or harmful enterprise pursuits (Baumol, 1990). Thus, the process and character of entrepreneurship pursuits when institutions are less effective in safeguarding the integrity of property rights or in ensuring human rights represent interesting areas for future research. For instance, the reliance on or attachment to specialized resources cannot be assumed to exist and, in these cases (George et al., 2012), the ability to pursue entrepreneurship, in terms of “discovery, evaluation, and exploitation” (Shane & Venkataraman, 2000), is quite bleak.
The illustration of the oPt illustrates the fact that despite the ability to recognize agricultural export opportunities and possessing the intimate knowledge of how to cultivate land resources and apply farming capabilities, farmers in the West Bank and Gaza are habitually subject to Israel’s imposed export blockades and other sanctions on the oPt (Amnesty International, 2010; Roy, 2004). Thus, even though these local entrepreneurs exhibit opportunity recognition and entrepreneurial foresight, without the ability to fully execute strategy, such capabilities and subsequent exploitation endeavors may diminish over time given the priority for basic sustenance. Rather, the entrepreneurial pursuit of enterprise occurs by any means possible.
Alternative to the pursuit of bricolage and cultural entrepreneurship strategies, other strategies leveraged by entrepreneurs who remain in these settings can be explored in future research (George et al., 2012). However, there may exist an alternative to staying and persevering. Under such extreme operating conditions, existing or prospective entrepreneurs may attempt to flee their countries to seek opportunities elsewhere. In such instances, those fleeing conflict settings face other struggles in foreign countries. For instance, the UNRWA indicates that up to 4.5 million diaspora refugees were created since 1948 (Parsons & Salter, 2008), and through its relief efforts, supports 59 camps throughout the West Bank, Gaza, Jordan, Lebanon, and Syria (Ghannam, 2000), where refugees in neighboring Arab counties also face issues of marginalization and discrimination (Said, 1979/1992). Immigrant enterprise opportunities in these areas of the Middle East also face daunting institutional constraints. Of those that remain in the oPt, many confront the difficult moral choice to seek informal entrepreneurship opportunities through clandestinely entering into Israel or working within Israeli settlements to survive (Illouz, 2014). Thus, exploring entrepreneurial processes for active or prospective LDC entrepreneurs within their home country versus when the entrepreneur leaves the country and must adjust to changes in host-country environments would also help inform the boundaries of institutional guidance to enterprise pursuits.
Investigate which entrepreneurship-related actors matter
The roles of different institutional actors within organizations or government vary across geographical contexts (Autio et al., 2011; Baker et al., 2005). By focusing on underexplored LDCs, scholars can illuminate the nuances and idiosyncrasies between the various actors and their institutional roles within different regions. Amid concurrent institutional constraints, it is valuable to understand which actors matter more to the entrepreneurial process and when they may adopt new practices or, perhaps, attempt to supplant existing institutional deficiencies. For instance, whereas nongovernmental organizations (NGOs) (Lawrence et al., 2002) or intergovernmental organizations (IGOs), such as the World Intellectual Property Organization (Khoury & Peng, 2011), have been highlighted as valuable intermediaries or catalysts for entrepreneurship within developing regions with characteristically weaker formal institutions, how do such organizations matter when there also exist limitations to informal institutional enactments? As such, future scholarship needs to understand which types (or what “depths”) of concurrent institutional constraints challenge NGOs and IGOs most or allow for them to have greater positional influence toward positive long-term development outcomes. Studying the contextual conditions, settings, and functional activities where such organizations can mitigate institutional constraints would provide a basis for entrepreneurs to compare the efficacy of these actors within the entrepreneurial process and to pursue the appropriate strategies that would ensure a more competitive stance to survive and attain growth opportunities for entrepreneurs.
Studying the constraints under which new entrepreneurial processes emerge
With the dual challenges placed on both formal and informal institutions, it is valuable to understand how new practices or forms of exchange are initiated over time. For instance, do new institutional practices around the use of social capital or other features of relational exchange emerge when security and mobility constraints challenge the daily level of autonomy of entrepreneurs? Perhaps, without the challenges of security and mobility, contractual exchange relationships that are more commonly determined through culture mechanisms would be determined according to the entrepreneur’s personal or familial affiliation (Chakrabarty, 2009; Miller et al., 2009) or by finding partners located in close geographic proximity (i.e., adjacent villages), as reputation can be validated more easily and there exists greater social pressure to honor contracts (Assaad, 1993). With these constraints placed on entrepreneurs, there are detrimental restrictions on investing in long-term customer and supplier relationships, higher costs for the search for new partners, and limited opportunities to leverage social capital within buying and selling strategies, which limits opportunities for development to occur through leveraging informal institutional dimensions (Cleaver, 2005). Regardless of what prompts the inability to utilize relational capital within exchanges (El-Said & Harrigan, 2009)—reasons have ranged from cultural prescriptions of gender boundaries (Olmsted, 1996) to the limitations of spatial access—it remains unequivocal that entrepreneurs in these regions face severe challenges (Silvey & Elmhirst, 2003). In such cases, there is a heightened suppression of the more prominent informal institutions that are central to economic and social exchanges—the taken-for-granted features of culture or the practice familiar norms (Biggart & Beamish, 2003), therein leaving an even larger paucity in informal institutional resources.
A vast literature on the subject converges on the point that institutions provide the necessary infrastructure for organizations to survive, grow, and remain competitive (Greenwood, Oliver, Sahlin, & Suddaby, 2008; DiMaggio & Powell, 1991; Scott, 1995). In building a body of evidence that entrepreneurship can prevail amid concurrent institutional constraints, scholars can gain a deeper understanding of organizational strategies for resource acquisition. Otherwise, the question remains: Without capable formal and informal institutions, how does entrepreneurship occur? Although the various entrepreneurship-relevant characters, organizations, and processes within the LDC settings may exist in a representational form that is seemingly understood by entrepreneurship scholars, their functions and their roles within the institutional environments of local entrepreneurs may be wholly unique or at least distinctive from the field’s current understanding of entrepreneurship. Thus, the study of the acute organizational dilemmas entrepreneurs face is important and offers a fruitful site for future institution-based research.
Conclusion
In adressing the extant literature on how institutions guide entrepreneurship, this article introduces the concept of concurrent formal and informal institutional constraints in an effort to illuminate the value of studying LDC contexts defined by such conditions as an important subject for scholarly inquiry. The authors emphasize the pursuit of institution-based research within such contexts where informal institutions are challenged to compensate for the more difficult to change formal institutions—a situation that leads to limited individual autonomy. To study such constraints around entrepreneurship challenges, scholars can benefit from applying the theoretical concepts of bricolage and cultural entrepreneurship to conceptualize the dynamics of the entrepreneurial phenomena under larger development challenges, such as that existing within LDCs facing extreme operating conditions.
Much of the existing literature beholds institutions to operate as the guiding compass for how organizations operate within civil society (North, 1990; Scott, 1995), and where there lies formal institutional deficiencies, larger, more capable organizations, such as MNEs, can either mitigate or supplant such deficiencies (Scherer & Palazzo, 2011). However, in more extreme operating settings where they are absent, less is known on how entrepreneurial organizations survive and exert competitiveness through entrepreneurial creativity and persistence. Through these settings, scholars gain access to a laboratory setting to explore how seemingly conventional entrepreneurial processes related to the discovery, the evaluation, and the exploitation of opportunities (Alvarez & Barney, 2005; Shane & Venkataraman, 2000) change or adapt when institutions are temporarily or indefinitely compromised. Despite the practical challenges of researching entrepreneurial phenomena within such areas (Naude, 2011), these investigations offer rare opportunities for the advancement of theory. With greater advocacy for pursuing research within these areas, the authors encourage scholars to account for how organizations adjust their strategies in the presence of concurrent formal and informal institutional constraints.
Given the transformative events of the last decade—such as the rise of warfare, global financial crisis, political unrest, and the influence of social movements—an increasing number of regions around the world resemble institutional environments that hold, not only, formal but also informal institutional constraints. The authors assert that a deeper understanding of such informal institutional constraints is critical to explore so as to represent a more comprehensive and accurate operationalization of how both formal and informal institutions interact with or compensate for one another to influence enterprise development. Understanding the dynamics of entrepreneurship as the means for recovery and repair within these settings allows researchers new sites for organizational investigation. Thus, the authors contend that the call to action for future research is timely, given the various contemporary prompts of compromised institutions that are available for study. In conclusion, this article has sought to catalyze interest among scholars, practitioners, and policy makers to invest in a more engaged understanding of how entrepreneurship unfolds within LDC contexts.
Footnotes
Acknowledgements
This article has greatly benefited by the helpful suggestions and guidance from guest editors Virginia Gerde and Christopher Michaelson, and the insightful comments provided by our three anonymous reviewers. The authors would also like to thank Nasser Abufarha of Canaan Fair Trade for his time and thoughtful insights to help make this work possible.
Authors’ Note
Earlier versions of this article were presented at the 72nd Annual Meeting of the Academy of Management in Boston, MA (appearing in the Entrepreneurship Division’s 2012 AoM Best Paper Proceedings) and at the New Developments in the Sociology of Work and Organizations Workshop in Sydney, Australia. This article was also improved by the feedback of Stephen Barley, Garry Bruton, Douglas Creed, Jerry Goodstein, Christopher Khoury, Vikas Kumar, Justin Webb, and Kyoung-Hee Yu.
Declaration of Conflicting Interests
The authors declared no potential conflicts of interest with respect to the research, authorship, and/or publication of this article.
Funding
The authors received no financial support for the research, authorship, and/or publication of this article.