The role of multinational enterprises and formal institutions in BOP markets

Verbeke, A., Simoes, S. and Grøgaard, B. (2024) The role of multinational enterprises and formal institutions in BOP markets. Journal of International Management, 30 (4). 101171. ISSN 1075-4253 doi: 10.1016/j.intman.2024.101171

Abstract/Summary

There has been much debate on the role of multinational enterprises (MNEs) in ‘Bottom of the Pyramid’ (BOP) markets. MNEs are advised to overcome institutional voids by making maximum usage of informal institutions. In practice, the empirical support for MNEs’ success and their contributions to the sustainable development of BOP markets has been limited. In this article, we focus on a realistic path –including the role of MNEs in this journey– to overcome the ‘poverty premium’. The poverty premium refers to goods being available to BOP customers only at a very high cost, especially when using credit, and we attempt to address the root causes of this barrier. We present an actionable, transaction cost economics (TCE) based approach for MNEs and other market actors to strengthen and leverage contract-enforcing institutions in the long-term, using illustrative examples of the digital and financial inclusion journey observable in India. Our study confirms the continued need in BOP markets to build on conventional economics and management thinking, for the poorest people to be lifted out of poverty. Here, efficient formal institutions do matter.

Item Type	Article
URI	https://centaur.reading.ac.uk/id/eprint/116731
Identification Number/DOI	10.1016/j.intman.2024.101171
Refereed	Yes
Divisions	Henley Business School > International Business and Strategy
Publisher	Elsevier
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