Institutional and societal values challenge modernizing emerging markets
By Sunny Chai ’24 (Dyson)
Emerging markets must overcome institutional and societal challenges in order to develop into modern markets, said Johanna Mair, professor of organization, strategy, and leadership at the Hertie School, a private independent graduate school located in Berlin, when she spoke to Johnson students in an Emerging Markets Institute webinar.
Mair explained how emerging markets must find a way to develop market structures that align with the values and institutions already ingrained into these countries’ cultures. A key point she made was that pre-existing values and institutions are not barriers; they are traits that make emerging markets unique, as they are not built upon traditional conceptions of Western markets.
Mair detailed how to address traditional, non-inclusive market structures in order to enable emerging markets to legitimize their market activities, which interact uniquely with existing institutions and norms. First, in terms of building inclusivity, participants of developed markets must reassess emerging markets’ ability to be tools for social and economic development and asses local realities as a starting point.
Relevant local realities include norms of social exclusion, poverty, and wealth inequality, but can encompass anything that could present a barrier to market development. To address these, participants of developed markets must consider the institutional voids that exist in these countries and work around social exclusion of women or other groups in the market-building process. While it may seem natural to want to uproot the cause of the market-building barriers, the reality is that the solution must be feasible to implement without dismantling social structures that have been in place for decades or centuries.
To truly build an effective, modern market, market participants must integrate social realities with market-building efforts. Building markets is difficult—one institutional model can vary in efficacy in different contexts. Thus, market-building requires an understanding of the unique cultures, politics, and institutions of each country.
Addressing institutional voids
According to Mair, property rights and autonomy—crucial for free markets to succeed—are key in addressing institutional voids. Societal influence, political pull, and religious doctrine are spheres people look to for authority, and they all exert (sometimes conflicting) power that can interfere with property rights and autonomy. Such contexts can exacerbate institutional voids, discouraging people from interacting and experimenting with Western market conceptions.
Mair made another point very clear: Emerging markets’ negative interaction with Western market conceptions due to a difference in contexts is not a sign of weakness. A market that does not look like a Western market can still be a modern market. It is important to recognize institutional plurality; nontraditional market conceptions can still be valid and effective.
Mair also addressed how to solve the problem of institutional voids in emerging markets. First, developed markets must enable market access and participation for emerging markets by renegotiating existing social orders. An intermediary or outside organization can facilitate these negotiations. If institutional interfaces are unstable and contested, developed markets must create opportunities for emerging market players to transform their relations, boundaries, and rules for shared market activities. These shared markets must be inclusive places, and nontraditional market activities must be legitimized by developed markets so that formal market-building activities can be integrated into emerging markets’ existing social norms and institutions.
Mair’s presentation was incredibly eye-opening. As a business student, I rarely find opportunities to learn about non-Western market structures and practices in class. It is necessary to understand and celebrate that emerging markets do not have to play by the rules of Western institutions to create modern, effective markets. I’m glad I was able to attend this webinar, as I hope to research this topic more and share my learnings with my peers in my classes. The future of emerging markets is pivotal in defining the future of markets as a whole, and I’m sure there are many useful lessons to be learned about market building and organizations from emerging markets’ activities. I would like to thank Mair for her engaging and informative presentation in the Emerging Markets Institute’s webinar lecture series.
About Sunny Chai ’24 (Dyson)
Sunny Chai is a freshman from Pittsburgh majoring in Applied Economics and Management in the Dyson School. She joined the Emerging Markets Institute’s marketing team in October 2020 and looks forward to learning more about both marketing and emerging markets through her work at EMI.