What are institutional voids?

In emerging economies, the institutional infrastructure to support market-driven economies and provide basic services often falls short.

Institutional development is a complex process, dependent upon specific factors related to the historical, social, and cultural forces shaping the country or region in question.

The most important factor in a market economy is the ability of buyers and sellers to find one another and complete transactions as seamlessly as possible. Institutional voids are the gaps that exist in specific markets that serve as roadblocks to the ideal interactions and transactions of buyers and sellers.

Institutional voids come in a variety of forms: absent or unreliable sources of information related to the market as a whole, uncertain regulatory or intellectual property regimes, and inefficient judicial apparatus are just some possible examples.

Although institutional voids are palpable impediments to effective transactions and the proliferation of beneficial services (such as reliable healthcare), they are also opportunities for entrepreneurial interventions.

 

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