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Chapter 3
Conceptualizing Markets for
Underserved Communities:
Trajectories Taken and the
Road Ahead
Sanjay Jain and James Koch
Santa Clara University
(1) Why are the ideas and lessons important to scholarship?
· Provides framework for understanding the different conceptualizations of
markets for underserved communities by surveying the various “schools of
thought” that have emerged over the past decade.
· Emphasizes theoretical approaches that take into consideration the local
context in which these exchange spaces are embedded.
· Offers a field-level, process-oriented perspective for developing markets for
these communities.
(2) What makes the ideas novel, useful, and non-obvious?
· Provides a richer and more nuanced understanding of markets in these
contexts; unbundles a “taken-for-granted” concept.
· Suggests move towards the conceptualization of a more socio-culturally
informed perspective on markets within these contexts.
· Highlights the adaptive role played by start-ups and local infrastructure (as
opposed to MNC’s) in the development of these markets.
(3) What are the key takeaways for practice?
· Elucidates the theoretical underpinnings for differences in practice/policy
prescriptions across the various “schools of thought.”
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· Provides means for designing more locally informed interventions that can
contribute to the holistic development of these communities.
· Highlights role of various actors — and the need for concurrent and
coordinated “top-down” and “bottom-up” interventions — in order to
develop markets within these contexts.
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Even as interest in crafting market-based solutions for addressing issues of poverty
and economic development across the world has burgeoned in recent times, there
has been relatively little systematic understanding of the specific nature of markets
within these contexts. In this chapter, we survey the important “schools of thought”
that have emerged over the past decade to address this issue and offer an integrative
rendering of these different images. In doing so, we provide a more nuanced
understanding of the nature of markets for underserved communities, identify
trajectories that can be gainfully pursued in future research, and suggest how this
work can both advance theory and inform practitioners operating in this domain.
Over the past few decades, there has been increased interest among policy,
practitioner, and academic communities in developing market-based solutions for the 4 billion people on this planet — or fully 65% of the world’s
population — that live on annual per capita incomes of less than $3,000 in
purchasing power parity (Hammond et al., 2007). This is partly in response
to the subdued record of other approaches, involving governments, aid,
charity and non-governmental organizations (NGOs) in addressing poverty
traps endemic in these communities (Easterly, 2006). This enthusiasm is
reflected in the discourse within development circles emphasizing the integral role that markets can play in increasing living standards across the world
(Mair & Marti, 2009), the allure to multinational firms in exploring the
potential that this immensely large pool of potential “consumers” presents
(London & Hart, 2004) and a vibrant conversation among scholars from
diverse disciplines related to the merits and means of adopting market-based
approaches in these contexts (Prahalad, 2004; Karnani, 2007; Viswanathan &
Rosa, 2007; Ansari et al., 2012; Mair et al., 2012). Given this interest, gaining
a deep appreciation of the nature of these markets — which we refer to in
this paper as markets for underserved communities1 as well as understanding
In offering this terminology, our intent is to more carefully characterize a segment of society
that been labeled the “bottom/base of the pyramid” in prior work (Prahalad, 2004; London &
Hart, 2010).
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Conceptualizing Markets for Underserved Communities 73
how ventures can navigate these spaces as part of offering their goods, is critically important.
But what exactly are markets within these contexts? What are the key
elements that constitute them? How are these exchange spaces different
from markets in advanced economies? Gaining an understanding of these
questions, we believe, is crucial from a theoretical viewpoint, as well as for
making relevant interventions that are likely to have a lasting and (hopefully) positive impact on these communities. Over the past decade, a number of different scholars, working in disparate disciplines, have begun to
provide their conceptualizations of markets in these contexts. Our objective, in this paper, is to capture and assess this imagery, and in doing so, to
offer suggestions on trajectories that may be worth pursuing in the future
as we attempt to address one of the most vexing challenges of our time —
fostering inclusive economic development.
We have organized the paper to cover the significant “schools of
thought” that have been part of this discourse within the management and
economic disciplines over the past decade. In our (admittedly impressionistic) estimation, this includes the work of C.K. Prahalad and his associates
(the “Michigan” school) that, in our minds, initiated the conversation
related to market-based approaches to poverty alleviation; the “institutional
voids” line of thinking, popularized by Tarun Khanna and his colleagues
(the “Harvard” school); the work taking place across the river at the Jameel
Poverty Lab pioneered by Abhijit Banerjee and Esther Duflo (the “MIT”
school); research on subsistence markets being conducted by Madhu
Viswanathan and his group (the “Illinois” school) and finally, more recently,
work being done by scholars coming from a sociology of markets orientation, that we refer to as the “West Coast” school given that the key proponents of this approach reside in schools in this geographic region. While we
do risk omitting some other schools of thought, our contention is that the
ones that we have featured represent a broad palette of the imagery that has
been (and is likely to be) influential within this domain.
Fortunes at the bottom of the pyramid
It was C.K. Prahalad’s landmark book “The Fortune at the bottom of the pyramid: Eradicating poverty through profits” (Prahalad, 2004) along with a series
of articles that he penned with his colleagues (Hart & Prahalad, 2002;
Prahalad & Hammond, 2002) that initially catalyzed significant practitioner
and academic interest in examining market-based solutions for underserved
communities. Hart and Prahalad (2002) posited that the vast unmet needs
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74 The World Scientific Reference on Entrepreneurship
for sustainable solutions to poverty and environmental degradation in emerging countries represented an opportunity for multinational companies to
overcome the challenges to growth that stemmed from increasingly saturated
markets in advanced economies. Prahalad and Hammond (2002) proffered
the BOP concept as an opportunity for developing market-based solutions as
profitable and sustainable alternatives to charity or welfare for alleviating
global poverty. In the minds of these authors, these markets were already
assumed to exist, with their size being empirically documented via a study
commissioned by the International Finance Commission and estimated at $5
trillion (Hammond et al., 2007). Moreover, this work suggested that the poor
were paying a “poverty premium” in the form of high unit prices for inferior
products, this representing a considerable opportunity for firms to realize
significant profit by serving fundamental human needs. Along these lines,
Prahalad (2012) identified a number of factors that he viewed as key for successfully operating in these spaces. These include creating awareness, enabling access, ensuring affordability and focusing on availability of the
product/service among potential consumers.
A key premise of the BOP perspective was the central role that multinational corporations would play in engaging with this market opportunity.
Their reach and resources were seen as critical to addressing the scale of the
needs in this vast segment of society. By leveraging local knowledge in rural
areas and urban slums to adapt their existing models, reducing risk in market entry and distribution, and learning from the monitoring of social
impact, these actors were envisioned as driving the development of these
However, the experience of the last decade has highlighted the limitations of this assumption. Most multinational’s had scarce knowledge on how
to adapt parameters that they understood within established product-­
markets — such as functionality and product preferences, price elasticity,
and brand consciousness — to these contexts. The diverse and fragmented
nature of these markets implied that a homogeneous, one-to-many
approach to product development — typically involving adapting and simplifying existing goods — did not work well in these communities. These
firms also learned the hard way that product-centered push marketing simply did not make sense in contexts where the biggest competitor is nonconsumption. Moreover, the archetypical low margin, high volume business
model that was perceived to be relevant to these scenarios proved to be
difficult to implement in practice. Other critiques to the BOP approach
have indicated that markets — as conventionally conceived — simply do not
exist in these contexts (Karnani, 2007), and that viewing the poor as
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Conceptualizing Markets for Underserved Communities 75
“markets” further perpetuates their exploitation as a group of individuals
(Ansari et al., 2012).
More generally, the significant gaps that existed between a multinational’s “way of doing things” and those demanded by these environments —
and the miniscule margins (if any) to be made from catering to these
communities have contributed to a lack of sustained motivation to get significantly involved with these markets. While there have been a few instances
where these firms have made progress in developing sustainable markets in
these contexts (Rangan & Rajan, 2005), their incentive structure, governance and organization make it difficult for them to engage in a persistent
effort at doing so. This reality has not been lost on the BOP scholars, as
Hammond (2010) articulated more recently:
“The failure rate of well-meaning entrepreneurs (and celebrities) from
wealthy countries who try to start an enterprise top down — working to solve
a social problem on the ground in unfamiliar turf without deep local connections, be it an urban slum in the rich world or a rural village in the developing
world — is very high. The record of large corporations that have attempted
top-down BOP business formation is somewhat better, but even with all their
resources, many multinationals and large national companies find the going
difficult. As C.K. Prahalad has argued, investment capacity is not as important
as the ability to collaborate, to build a new ecosystem, and to develop fundamentally different business models. Thus, successful BOP enterprises — especially those organized by local entrepreneurs — are mostly built bottom-up.”
Indeed, the more recent consensus among BOP proponents is that
start-ups, rather than multinational corporations are more likely to lead the
way in developing market-based solutions to poverty. Having said that,
there is also recognition that start-ups themselves cannot go it alone — and
have largely been unable to surmount the scaling challenge — given the
complexities involved in operating within these environments. Underlying
this viewpoint is a growing appreciation among these scholars of the importance of coordinating external factors — from supply chains and distribution, to culture, social structures, community leadership, government, and
sources of financing — in developing markets for these communities. In
highlighting these factors, BOP proponents now acknowledge that the
landscape of potential partners for start-ups operating in this space — both
local and global — is both crucial to enterprise success and remains poorly
The BOP perspective, then, has been noteworthy in highlighting the
need for developing market-based solutions for impoverished communities.
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76 The World Scientific Reference on Entrepreneurship
However, it has been less clear in articulating the contours of an integral
concept underpinning its premise — i.e., the nature of the market itself. In
initially presuming its existence — and in doing so, largely equating markets with their advanced economy counterparts — the proponents of this
perspective have had to rely on ongoing field-based evidence to revise their
understanding of the key characteristics of markets in these contexts and,
related to this, the factors required to operate in these environments. In
contrast with this “learning by doing” approach to conceptualizing these
spaces, we now turn to reviewing a number of theoretically driven
approaches to understanding markets for underserved communities.
Markets riddled with institutional voids
Another influential image of the market for underserved communities comes
from the work of scholars drawing from the transaction cost economics perspective (Coase, 1960; Williamson, 1985). They suggest that advanced economies (such as the United States) possess an elaborately developed institutional
context — which include such facets as well-defined property rights, rules of
exchange and legal recourse — that enable the emergence of well-functioning
capital, labor and product markets. By contrast, these equivalent structures in
emerging economies (such as India) are plagued by information and agency
problems, resulting in a host of market imperfections (Khanna & Palepu,
2000). As an example, they indicate that inadequate disclosure, weak corporate
governance and the erratic enforcement of securities regulation characterize
financial markets in these countries. Moreover, specialized intermediaries
such as financial analysts, mutual funds, venture capitalists and the financial
media have not yet fully developed. As a consequence, firms operating in
these scenarios find it difficult to implement key strategic decisions such as
acquiring necessary inputs like finance, technology, and human capital, or to
establish contractual relationships with partners.
Markets, in these contexts, are characterized by “institutional voids” —
i.e., the absence of the requisite institutional arrangements and/or actors
required to enable their smooth functioning (Khanna & Palepu, 1997).
These voids — which manifest themselves in terms of such elements as the
feeble enforcement of formal regulations as well as the lack of intermediaries and public infrastructure — raise transaction costs and as a consequence,
significantly hinder market-type activity. This stream of research, then, highlights the lack of underlying institutional structures in these economies and
emphasizes the considerable challenges that actors confront while operating in such spaces (Mair & Marti, 2009). Put differently, the imagery that
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Conceptualizing Markets for Underserved Communities 77
this work conjures is one of barely functioning markets given the pervasiveness of institutional voids in the context of underserved communities. De
Soto (2000) evocatively captures this dynamic as “trapped capital” in
describing how the absence of legal structures around property significantly
hinders capitalism-related activity in emerging economies.
A significant body of research on transitional and emerging economies
has devoted itself to working out the implications of operating within situations typified by institutional voids. Along these lines, arrangements such as
family business groups and guanxi that are pervasive in these contexts have
been reconceptualized as compensatory structures that bridge the gap
wrought by such voids (Khanna & Palepu, 2000; Ahlstrom & Bruton, 2006).
Other work highlights how the presence of such voids impacts the manner
in which firms engage with such economies (Puffer et al., 2009). Research
in the underserved communities context has indicated that given the uncertainty that weak institutions engender, developing relationships with local
actors such as non-government organizations can offset the impact of such
voids (Webb et al., 2009). A more recent strand of scholarship emphasizes
the significant amount of business activity that occurs outside of formal
institutional boundaries but within the realm of informal economies (Webb
et al., 2014), suggesting that markets exist at the interstices of these two
domains. Taken together, these studies highlight the nature and effects of
institutional voids as well as the structures and mechanisms via which actors
navigate such spaces.
The “voids” perspective is insightful in that it emphasizes the significance
of underlying institutional arrangements as being central to the functioning
of markets — i.e., it encourages an appreciation of “markets as institutions”
(North, 1990; Fligstein, 2001). It is important to note, however, that in framing differences in markets across economies as voids, it presumes that the
path to market development within underserved communities lies in “filling” these voids. Indeed, the dominant prescriptive discourse within this line
of thinking suggests that powerful actors with sufficient resources such as the
state and/or business groups are the ones who need to address these voids
(McMullen, 2011). The state can do this via enforcing property rights, contracts, governance structures and other methods of control. Where the state
is weak, business groups or more informal organizational forms can step in,
encouraging self-regulation and other mechanisms of trust in order to help
markets to function. More broadly, this perspective is in consonance with the
thinking of developmental economists who advocate the need to transpose
formal institutional arrangements to fill voids — i.e., they largely promote a
“top-down” approach to market development (Sachs, 2005). In summary,
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this line of thinking — deriving from modernization theory (Rostow, 1960) —
emphasizes gaps in development that exist between advanced and emerging
economies and highlights high-level interventions and (largely) the provision of formal institutional arrangements as the means towards moving
towards more market-friendly spaces within these communities.
The market entry (BOP) and institutional voids perspectives can, at one
level, be viewed as two ends of a continuum — “there is a market waiting to
be tapped” versus “the exchange space is riddled with institutional voids”.
However, they do share a few crucial similarities. They are both largely “etic”
in orientation (Pike, 1954), reflecting an outsider’s perspective of the key
features characterizing markets in these communities and providing prescriptions that reflect these worldviews. Their predominant focus is on the
producer side, i.e., on the firms and entrepreneurs that attempt to engage
with these markets. Missing from these perspectives is a more proximate
understanding of the lives that individuals within these communities lead
and how this translates into the exchange systems that have evolved within
these contexts. Related to this, there is little or no consideration of the
nature of consumption (or consumers per se) in these situations. More
recently, scholars working in disparate traditions have begun to adopt more
of an “emic” orientation to better appreciate economic interactions as well
as the consumption experience within these communities. We now turn to
examining this work.
Markets comprised of decision-makers and social networks
A growing stream of research within developmental economics employs a
proximal orientation towards understanding economic exchange in lowincome societies. Banerjee and Duflo’s (2011) pioneering work significantly
details — through the use of household surveys — the lives of the extremely
poor, in terms of the choices they face, the constraints they grapple with and
the challenges they address. The families that they surveyed earned less than
$2.16 a day (per household), which constitutes 40% of the population for the
median country in which they conducted their research.2 They observe that
the typical extremely poor family tends to be large — the number of family
members varies between six and twelve, with a median value of seven and
eight, as compared to 2.5 in the 2000 US census (Banerjee & Duflo, 2007).
The authors conducted surveys in 13 countries, including the Ivory Coast, Guatemala,
India, Indonesia, Mexico, Nicaragua, Pakistan, Panama, Papua & New Guinea, Peru, South
Africa, Tanzania & East Timor.
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Conceptualizing Markets for Underserved Communities 79
While food represents a majority of their consumption (ranging from 56% to
78%), among non-food items, alcohol and tobacco shows up prominently.
Many other interesting and counterintuitive observations emerge from
their work: for example, they find that the poor spend surprising large proportions of their income on entertainment (i.e., weddings and festivals).
Moreover these individuals place a high value on remaining close to their
social network — so much so that they forgo opportunities to augment their
income via temporary migration to other regions (Munshi & Rosenzweig,
2006). While a substantial fraction of the poor are entrepreneurs in the
sense of raising capital and being claimants for the resulting earnings, their
businesses operate at a remarkably small scale. And while the poor certainly
feel poor, their levels of self-reported happiness and self-reported health
levels are not particularly low (Banerjee et al., 2004).
More generally, they find that the poor often lack crucial pieces of information and believe things that are not true. Moreover, as compared to more
affluent groups, they bear responsibility for too many aspects of their lives —
i.e., they have to decide on a broader swathe of day-to-day activities to sustain
their existence. Many of these choices have a long-term horizon, leading to
procrastination on their part. Finally, their expectations of what they are able
or unable to do often turn into self-fulfilling prophecies. While not directly
focusing on markets per se, this work nevertheless provides valuable insights
into the consumption patterns and decision-making of individuals in these
These insights highlight the significant understanding that can be
gained by employing research techniques that directly examine the lives of
underserved communities. Along these lines, these researchers have pioneered the use of randomized control trials — a research technique typically associated with the testing of pharmaceuticals — as a means of
understanding what types of interventions and programs work (or do not
work) in these communities. Moreover, the policy prescriptions they provide are similarly more micro in their orientation, in that they focus on
providing “nudges” to individual behaviors in these communities that enable them to make more effective decisions (Thaler & Sunstein, 2008). In
adopting this mindset, this stream of research more centrally acknowledges
the discretion and the decision-making of the poor in the markets in which
they participate.
While coming from a different disciplinary background — marketing —
Viswanathan’s ongoing scholarship (Viswanathan, 2007; Viswanathan &
Sridharan, 2012) adopts a similar approach to the study of what he terms
subsistence markets. Employing observations and in-depth interviews of a
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variety of buyers and sellers in rural and urban South India, this work documents how marketplaces in resource-poor contexts are typically network rich
in face-to-face interactions and exchanges that stand in contrast to the largely
anonymous interactions typical of advanced economies. Word of mouth and
one-to-one relationships between the individual and the neighborhood retail
storeowner take center stage in these situations. The nature of transactions is
often fluid, with price and quantity being negotiated, installments not being
paid and prices being adjusted for personal circumstances to both the buyers
and sellers advantage. In summary, “subsistence markets” are characterized by
complex web of interdependencies and interactions between buyers and sellers, and functioning in these conditions requires developing trusting relationships and norms of reciprocity that have a medium-to-long term perspective.
A second strand of research provides insights into how microenterprise
operators in subsistence markets — an important final link in the supply
chain — manage consumer relationships while balancing supplier and family demands (Viswanathan et al., 2010). These individuals are referred to as
“subsistence consumer-merchants” to highlight the multiple roles that they
juggle simultaneously — i.e., as business owners and family providers. As
part of being at the center of these different networks, they move their
scarce resources within and across role-related network boundaries,
attempting to keep each of these viable in a delicate balancing act.
Moreover, they rely on social commitments — rather than formal institutional mechanisms — to sustain and stabilize their business. These dynamics
both spotlight a key actor within these contexts as well as illustrate the interdependent and self-sustaining relationships that exist between them and
vendors, customers and family members in these communities. More
recently, this work has been further expanded to understand the nature of
subsistence entrepreneurship, actors who are completely embedded and
transact within the underserved communities to which they belong
(Viswanathan et al., 2014). These authors go on to identify social capital as
a key mechanism underlying the creation and effective operation of the
microenterprises that populate these domains, and further assert that such
capital is critical to the emergence of community-level exchange systems.
This work has many parallels with the research on informal economies
(Webb et al., 2014).
As illustrated above, these research streams provide a detailed and vivid
appreciation of the economic lives of the poor and the exchange systems
that exist within underserved communities. While the Banerjee and Duflo
work emphasizes individuals and individual decision-making — often
employing a behavioral economics lens to understand the tendencies and
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Conceptualizing Markets for Underserved Communities 81
proclivities of the poor, Viswanathan’s scholarship examines the organization of subsistence markets and emphasizes the role of relationships and
networks in these contexts. Both streams advocate the virtues of a “bottomup” orientation to understanding underserved communities and offering
policy prescriptions. This ranges from developing methods and techniques
that can enable individuals in these communities to make better decisions
to offering suggestions on how firms can better engage with these markets.
Their research methods for understanding and characterizing these markets are significantly field based, involving surveys, interviews, and observations. Most significantly, both research approaches highlight the ongoing
functioning of markets within these communities — despite the many
obstacles foreshadowed by the institutional voids perspective — in terms of
individuals making decisions regarding the consumption of goods and services and exchange systems evolving to address these needs. Moreover, the
preliminary research carried out in this domain suggests that the contours
and characteristics of these markets are often quite different from those
observed in advanced economies. These studies point toward the need to
develop a more culturally informed appreciation of the nature of these
markets, a perspective that we review next.
Markets constituted by local institutions
The final perspective on markets for underserved communities comes from
the sociology of markets and economic sociology disciplines. This burgeoning literature highlights the complex social structures and institutions that
underpin the functioning of modern markets. In doing so, it shares commonalities with the work of institutional economists (North, 1990), though the
core premises are substantially different (Granovetter, 1985). An influential
perspective within this stream of research suggests that markets are politicalcultural constructions whose underlying social structure is best viewed as the
outcome of attempts to foster stability (Fligstein, 2001). Much of the prior
work in this domain has been conducted within the context of advanced
economies, rendering the application of these ideas within the emerging
economies context as an important research opportunity.
In order to do this, our own research suggests that a useful starting
point for understanding the institutional foundations of these markets
requires adopting a micro-analytic orientation and appreciating the native
institutional arrangements that delineate modes of exchange within these
communities. From this perspective, these societies (and the people who
populate them) are suspended in webs of values, norms, rules and
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meanings — i.e., local institutions — that both form the basis for social
action and are partially of their own making (Geertz, 1973). Put differently,
local institutions can be conceptualized as the modalities (Giddens, 1984)
that manifest themselves as understandings, practices and infrastructure
(Dimaggio, 1997; Schatzki et al., 2001), emerge through processes of historical accretion, and delineate forms of exchange in these contexts. This view
highlights the significance of appreciating pre-existing arrangements,
mechanisms and typifications that characterize market activity in these communities (see also Stark, 1996). Put differently, these local institutions —
that have largely been rendered invisible by the institutional voids
perspective — are crucial to understanding both existing markets as well as
market development activity in these contexts.
Along these lines, Mair et al. (2012) highlight how local political, cultural and religious forces intersect with one another to create marketspaces
that exclude or marginalize the participation of women. They demonstrate
how what have typically been considered “voids” in these contexts are in fact
spaces that are institutionally complex — i.e., they are negotiated settlements involving these various local forces. Their insightful work goes on to
detail the on-the-ground activity that BRAC, a prominent NGO operating in
Bangladesh, has engaged in over the past few decades to reconfigure these
spaces as part of building inclusive markets. Moreover, via intensive engagement with over 200 social ventures operating in this space (as part of their
participation in an incubator program), James Koch and his colleagues
have identified locally focused innovation, micro-provisioning and socially
anchored distribution systems as key elements to developing markets for
these communities (Desa & Koch, 2014; Jain & Koch, 2014). This work
highlights the political-cultural foundations of these exchange systems
(Biggart & Delbridge, 2004). In doing so, it accentuates the importance of
“opening the black box” and viewing these communities as being embedded in a pre-existing set of local institutions that need to be accounted for
while engaging with them.
In highlighting the diverse set of factors that constitute the institutional
underpinnings of a market and in emphasizing the need for a strong sensitivity to the local forces operating in these communities, the sociology of
markets perspective shares significant affinity with the other “emic” perspectives that we have described. Taken together, these approaches share a
common sensibility to understanding the spaces for economic exchange in
these societies on their own terms. An embrace of this position, we contend, is likely to expose observers to the plurality and complexity — warts
and all — that characterize these markets. It also highlights the need to
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Conceptualizing Markets for Underserved Communities 83
take these preexisting institutional arrangements into account as part of
initiatives to develop and operate within markets in these contexts.
Having said this, it is important to highlight the differences that exist
between each of the “emic” perspectives. A salient one that we highlight
involves the level of analysis that these approaches employ. Banerjee and
Duflo’s work largely focuses on individuals, Viswanathan’s research emphasizes networks and social capital, and the institutional sociology stream
highlights local institutions — in the form of understandings, practices and
infrastructure. This difference in emphasis results in somewhat different
prescriptions related to the development of exchange systems in these contexts. However, in combination, they constitute the core elements of a fieldlevel approach to understanding the exchange systems that characterize
Summary and moving forward
Our review of the approaches employed to conceptualizing the market for
underserved communities, at one level, portrays a rather convoluted trajectory that academics have traversed as they have gone about making sense of
this space. Starting from a vision that these are markets waiting to be tapped,
scholars have conjured up images that range from these spaces being rife with
institutional voids that encumber exchange to images in which consumers
exercise discretion — albeit related to the consumption of miniscule quantities of goods and services. This has been followed up by research that has
demonstrated the need for viewing these markets on their terms and to the
beat of their own logics — involving rhythms that are quite different from
those that characterize markets in advanced economies. In doing so, we have
migrated from a vision of “serving markets” to one of “developing these markets”, one involving a process of co-creation. More generally, the emerging
consensus is that these markets are more inscrutable, resource-constrained
and idiosyncratic than originally envisaged. While this poses challenges for
navigating these spaces, the detailed understandings that we are obtaining of
these contexts — courtesy the rich, field-based investigations that have been
and are currently underway — are providing us with the ability to both imagine and engage in more nuanced and sophisticated forms of market development for these communities.
These differences in imagery are to some extent due to the underlying
ontologies of the academic domains that they are based upon. The early
work in this realm was conducted by scholars steeped in the strategy and
institutional economics disciplines. This translated into rather abstract
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notions of the market — i.e., one dominated by supply and demand curves
and market failures. Subsequent research has been carried out by development economists with a distinct behavioral economics bent — as reflected
in their focus on individual decision-making — and by economic sociologists and marketing scholars rooted in an inductive philosophy. The latter
in particular, in drawing on the tools and techniques of cultural anthropologists, have made vivid the blooming confusion and complexity that characterizes the economic lives of underserved communities. These differences
carry over to the methodologies of inquiry employed, with the strategy/
institutional economics researchers basing their insights on comparative
analysis and case-based information while the developmental economists/
marketing/sociologists relying heavily on field-based observational
Not surprisingly, these differences in imagery have contributed to policy
prescriptions for market development that span the gamut. For those who
conceptualize these spaces as being riddled by institutional voids, the solutions lie in “filling these voids” — i.e., engaging in institutional development or evolving structures that can viably operate under these conditions.
This view — which is akin to a “glass-is-half-empty” mindset — is consistent
with the “top-down” approach to economic development that has dominated policy circles for the past several decades. On the other hand, for
those who conceptualize these spaces as being constituted by real people
living within the web of their own circumstances, these local and more
ground-level institutions need to be taken into consideration in any form of
policy intervention. In this “glass-is-half full” mindset, prescriptions take on
a “bottom-up” orientation, and involve nudges that ensure that individuals
make decisions that are in their own best interests as well as implementing
innovations that take pre-existing local institutions into account.
Moving forward, we envisage significant opportunities for further sharpening our imagery of these markets using each of these lenses, given that we
are still in the early days of conceptualizing these spaces as bonafide
exchange systems. However, there would appear to be more to be gained in
understanding these spaces on their own terms — i.e., employing fieldbased methods to discern the lives of the poor, their aspirations and their
consumption patterns and needs. Opening up this black box, we believe,
while difficult — given that our mindsets are typically conditioned by an
advanced economy orientation — is critical to crafting relevant mechanisms
for engaging with these markets. Moreover, in doing so, the hope would be
to unleash the true power of markets as a significant developmental vehicle
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Conceptualizing Markets for Underserved Communities 85
for these communities, one that contributes to their economic vitality, social
progress and environmental sustainability.
In particular, we identify three related domains that we believe are particularly ripe for exploration as management and development scholars.
The first of these involves using a field-level framing for understanding
these spaces (Fligstein & McAdam, 2012). Employing this level of analysis
enables us to appreciate the multitude and diversity of actors and arrangements involved in the functioning of markets in these contexts — i.e., it
recognizes these spaces as being fundamentally constituted by socio-political
and cultural forces. In addition, given the context, this also implies looking
for these actors and interactions to exist in somewhat different configuration of forms and processes than would be observed in an advanced economy context. For instance, there is likely to be less reliance on formal
institutional arrangements, this being often supplemented by local norms
and traditions. More generally, studies that theoretically incorporate the
notion of local institutions and empirically examine ground-level dynamics
are likely to provide us with a more nuanced understanding of these
exchange spaces as well as offer valuable insights regarding the kinds of
interventions that are likely to have a more meaningful impact for these
communities. In actually taking into account the lives of these individuals —
rather than reducing them to a set of preferences, demand curves or institutional voids — we are more likely to develop markets, to paraphrase
Schumacher (1973), as if people mattered.
Building on this, we suggest that adopting a field-level approach involves
developing policy interventions that combine both a “top-down” and
­“bottom-up” approach (we view these two approaches as being “counterintuitively complementary”). In making this statement, we acknowledge that
market development — with its associated economic benefits — is a fieldlevel project involving multiple actors including the government, various
forms of organizations as well as the individuals residing within these communities. Designing initiatives such that there can be greater alignment
between more “micro” and “macro” forms of intervention represents an
exciting domain for policy research. This will potentially involve the deployment of increasingly elaborate forms of public–private partnerships that
traverse a field and help compensate for the limitations of any one actor
that are members of it. Here, the availability of increasingly accessible and
ubiquitous technologies — such as mobile communications and the
Internet — will vastly enable coordination across these actors as they go
about experimenting with and implementing their solutions within these
communities. Examining these new organizational forms as well as the
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86 The World Scientific Reference on Entrepreneurship
interaction between the social and the material in the design of these market interventions represent exciting domains for future research.
Related to this, future work could examine in greater depth the role of
different actors in developing markets for underserved communities. The
early emphasis on multinationals being a likely key player within this space
is giving way to a realization that the incentives and motivations of these
actors may not be quite in alignment with the demands and uncertainties
of operating in these environments. However, a number of start-ups are
increasingly venturing into and making their mark this space. At one level,
this would appear to be an anomaly — start-ups find it difficult to become
viable even in advanced economy contexts so how would they be able to
operate in the decidedly harsher conditions that characterize these communities? However, as research is beginning to indicate, the underlying
rationales for these ventures may be quite different than a classic for-profit
firm (Grimes et al., 2013). Indeed, these start-ups often assume a hybrid
orientation, intending to be economically viable while making a societal
impact (Battilana & Lee, 2014). At a more fundamental level, understanding the origins of these hybrid orientations, how they cohere to form a
composite identity, the stability/fragility of these identities and their
impact on the ongoing growth and survival of these start-ups, are all interesting trajectories for future scholarship. Tracking how these ventures are
going about navigating the process of market development within these
communities while ensuring that they remain viable businesses represents
a fertile domain for research. At another level, further scrutiny of the indigenous organizational forms that emerge as market intermediaries within
these communities — such as the subsistence consumer-merchants identified by Viswanathan et al. (2010) — is warranted. This work will likely highlight the diverse motivations and contextual factors that influence both the
form and nature of participation in market development within these
And finally, we believe that future studies should further unpack the
fundamentally processual nature of market development for these communities. This would require acknowledging that markets need to be evolved
in these contexts, rather than be created from scratch (Schumacher, 1973).
It would involve tracing the migration of pre-existing indigenous arrangements towards “more evolved” and elaborated forms. In taking a longitudinal approach, studies will be able to observe the more common impediments
that manifest during market development as well as discern the inevitable
unanticipated consequences that occur as part of the process. Here, an
interesting conjecture to pursue would be whether we can develop systems
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Conceptualizing Markets for Underserved Communities 87
of exchange that have embedded within them a more humanistic logic than
the impersonal forms of market exchange that characterize advanced economies (Ansari et al., 2012). More pragmatically, understanding what forms
of market development work (and stick) versus those that do not would be
an important outcome of these inquiries. Also, establishing the generalizability of these market intervention initiatives — and hence addressing the
scaling issue — would be another important domain to address. While the
current discourse tends to pit scaling with customizability — and accords
significant emphasis to the former — it would interesting to see what forms
of mid-ground exist, i.e., to what extent (and in what manner) can working
solutions within one context be ported to other scenarios.
Combining the three strands we have identified would, in our estimation, enable the development of a powerful perspective that conceptualizes
market development as field-level activity involving a multiplicity of actors
(with differing motivations) who engage with local, deeply embedded institutions that constitute the lives of these communities employing a mix of
bottom-up and top-down initiatives on an ongoing basis (see Figure 1).
Working out the inner mechanisms of this multi-level, multi-period enterprise can provide us with novel theoretical insights related to the nature of
markets. In addition, it can offer us valuable practical and policy lessons on
how to address one of the most vexing challenges of our time — bringing
the basic necessities (and beyond) to the majority of humanity.
In conclusion, we would like to highlight the significant strides that have
been made in sketching a portrayal of markets within underserved communities over the past decade. This is a testament to the intellectual energy
that has been invested into this domain, one that — as our survey of the
BOP perspective
“Market entry”
Exchange systems
Field-based approach
Figure 1. Conceptualizing markets for underserved communities: Integrating the theoretical
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various schools of thinking that have emerged during this time demonstrates — thankfully shows no sign of abating. We believe there are significant gains to be made via further exploration of this space, as an
understanding of the nature of markets in these contexts is a critical early
step towards developing appropriate and inclusive solutions that can truly
make a difference to the lives of these communities. On this front, we still
have a long journey ahead of us.
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