Problems with Insitutional Voids: Lessons from the Arab World

‘Institutional voids’ is a concept used to describe institutional effectiveness in developing economies. Namely as they relate to business environments and the market gaps the produce. Initially meant to describe how developing countries tend to lack effective institutional mechanisms such as adequate contract-enforcement that are commonplace in the West. However, since their introduction to academic literature in 1997, (Khanna & Palepeu, 1997) the scope of the idea has been expanded to describe problems such as a general absence of law enforcement and limited government support for social programs.
The primary question this thesis seeks to resolve is whether institutional voids have any practical use informing managers about business environments in the Global South. The hypothesis is that the concept is now so diffuse that it has become effectively meaningless and that managers in the real world use more sophisticated methods of assessing potential host countries. The telecommunications industry is particularly vulnerable to the institutional capabilities of host governments is because of its reliance on the host government to provide effective capital markets and appropriate legal mechanisms needed for investment in infrastructure and technology. For this reason, this research will focus on what role, if any, Institutional Voids play in corporate decision making.
After performing a comparative case analysis, the researcher found that after examining the cases the outcomes diverged from what the institutional voids hypothesis would have suggested, suggesting that the hypothesis is insufficient at predicting outcomes. Researcher then suggests using statistically proven models from development research to better analyze government capacity across countries.