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Journal ArticleDOI

Negotiating new institutional logics: market access amongst smallholder farmers in Zambia and Malawi

03 Dec 2019-Society and Business Review (Emerald)-Vol. 14, Iss: 4, pp 360-377
TL;DR: In this paper, the authors analyse how processes of institutional change in environments of institutional voids affect smallholder farmer market access in Zambia and Malawi, and explore the role of different dis/enabling institutional agents and logics.
Abstract: Purpose – This paper aims to analyse how processes of institutional change in environments of institutional ’voids’ affect smallholder farmer market access in Zambia and Malawi, and explores the role of different dis/enabling institutional agents and logics. The authors examine this in the context of two divergent routes of institutional change – one externally imposed and the second driven from within the ecosystem itself. The authors consider how these different institutional processes impact upon smallholder farmers and how they are able to adapt to these changes. Design/methodology/approach – A qualitative research approach is used which lends itself to an analysis of multiple institutional logics that is based upon the multiple positions of market actors. It uses a comparative case study design methodology focused on two broad cases of smallholder farmers in Zambia and Malawi. Findings – The research demonstrates the tension that multiple institutional logics can create especially amongst those most vulnerable particularly where these are not embedded in local realities and mindful of social settings. Originality/value – It contributes to the understanding of poverty alleviation in rural developing regions, on overcoming institutional voids, market inclusivity and the role of social entrepreneurs and intermediaries, and builds on the perspective of markets as social spaces for economic exchange.

Summary (2 min read)

Introduction

  • Market access amongst smallholder farmers in Zambia and Malawi, also known as Negotiating new institutional logics.
  • If you wish to cite this item you are advised to consult the publisher’s version.

2.1 Institutional voids and logics in rural developing markets

  • From a new institutional economics perspective (NIE), markets are bundles of institutions that provide a platform for social and economic exchange of goods and services (North, 1990).
  • Weak institutions result in high and unpredictable transaction costs thereby reducing market access and dis- market exclusion, weak institutions result in the formation of institutional voids through ‘empty spaces’ (Mair et al., 2012).
  • In these extreme settings, bricolage and cultural entrepreneurship are characterized by informal activities which are supported by informal institutions that rely on relation-based transactions.
  • The very notion of institutional voids is contested.
  • It also demonstrates the construction of legitimacy in markets in terms of how goods are traded and how narratives are constructed around this (Anteby, 2010).

2.2 Building inclusive markets amid multiple institutional logics

  • According to Smith et al. (2016), when exogenous and endogenous elements get combined in a given business environment, the business model that results will likely be a dynamic and contextually adapted one.
  • To navigate institutional environments that have (2012) and Venkataraman et al. (2016) propose that the distinct logics can be leveraged to create social structures to fill institutional voids and enable market participation by the vulnerable.
  • The advantage of a pragmatic approach is its attention to contextualized knowledge.
  • The authors focus on two broad cases of smallholder farmers in Zambia and Malawi and they discuss each in turn.
  • Both countries were colonized by the British towards the end of the 19th century and were joined by the British in a single Federation before their dissolution share many common institutional characteristics, history and geography, and climatic conditions.

Insert table 1 here

  • Data for researching the case study was collected through semi-structured questionnaires and interviews that comprised open-ended questions.
  • With the permission from the respondents, the interviews were electronically recorded and transcribed verbatim to come up with the themes necessary for analysis.
  • Analysis of the data proceeded in iterative stages as proposed by Ingham-Broomfield (2015).
  • Based on the theory, the codes were then categorized between formal and informal navigation strategies, and the reconciliation of institutional logics in the presence of institutional change.
  • To enhance the research credibility the findings were based on interviews with respondents that were directly involved with audit trail was maintained.

4.1 Reconciling institutional logics in Malawian smallholder tobacco farming

  • Malawi is Africa’s largest exporter of burley tobacco supplying close to 82% of the burley tobacco exported from the continent.
  • Growers of tobacco in Malawi are classified into two groups – estate growers and smallholder farmers.
  • Under this system the objective is to achieve automatic price discovery through open bids.
  • As a result of international developments in tobacco markets including the growing influence of the anti-tobacco lobby and increased litigation against leading tobacco manufacturers in developed countries, the tobacco industry has tried to improve its image and has pursued the Sustainable Tobacco Program (STP).
  • From the 2015 selling season, contract marketing has become the predominant selling mode of tobacco in Malawi.

4.1.1 Navigating institutional voids in Malawi’s tobacco industry

  • Several institutional voids are apparent in the Malawian tobacco industry as it applies to smallholder farming.
  • The authors highlight a few of the key institutional voids faced by smallholder farmers in participating in formal markets.
  • But Malawi’s formal financial markets are very thin and largely do not meet the needs of the very poor with only 16% of households having an account at a financial institution.
  • While powerful market actors can exert influence and pressure (and money) to affect the regulation in their favor, the smallholder farmers in Malawi’s tobacco markets are often resigned to their fate: ‘Usually it’s the smallholder growers that comply with regulation because they are afraid as they don’t have a lot of money.
  • (M7). c) Impact of the new institutional logic on product market voids:.

4.2 The Zambian case: The role of intermediaries in creating new institutional logics

  • The Zambian smallholder farming sector demonstrates much of the same characteristics of institutional voids as neighboring Malawi.
  • Thereby the collective actions of smallholder farmers can assist in penetrating markets which would be impossible for single farmers to do (Markelova & Mwangi, 2010).
  • The interventions may be successful in overcoming local constraints but if the institutional voids persist and if the intermediary interventions are not fully codified then once the intermediaries withdraw the danger is that the voids strangle the new institutional ‘offshoots’ (to use a botanical analogy).

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Negotiating new institutional logics: market access amongst
smallholder farmers in Zambia and Malawi
Article (Accepted Version)
http://sro.sussex.ac.uk
Luiz, John, Kachika, Kondwani and Kudzurunga, Tapfumaneyi (2019) Negotiating new
institutional logics: market access amongst smallholder farmers in Zambia and Malawi. Society
and Business Review, 14 (4). pp. 360-377. ISSN 1746-5680
This version is available from Sussex Research Online: http://sro.sussex.ac.uk/id/eprint/86888/
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published version or from the version of record. If you wish to cite this item you are advised to
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1
Accepted for publication in: Society and Business Review
DOI (10.1108/SBR-01-2019-0015)
Negotiating new institutional logics: Market access amongst smallholder farmers in
Zambia and Malawi
John M. Luiz*, Kondwani Kachika** & Tapfumaneyi Kudzurunga**
* University of Sussex Business School, UK, and University of Cape Town, South Africa
** Graduate School of Business, University of Cape Town, South Africa
1. Introduction
The study analyses how processes of institutional change in environments of institutional
voids
1
affect smallholder farmer market access in Zambia and Malawi, and explores the role of
different dis/enabling institutional agents and logics. We examine this in the context of two
divergent routes of institutional change - one externally imposed and the second driven from within
the ecosystem itself. We consider how these different institutional processes impact upon
smallholder farmers and how they are able to adapt to these changes.
The availability and affordability of food is a priority for many developing countries and
well-functioning agricultural markets can also be utilized as engines for sustainable economic
1
We park for the moment the contestation over the concept of institutional voids (Seremani & Clegg, 2016;
Bothello, Nason & Schnyder, 2019) but return to this later in the paper and explain why we persist with this
terminology in this context.

2
growth and the reduction of poverty. But developing countries often have rural markets fraught
with market failures and institutional settings which increase transaction costs and reduce market
inclusivity especially for smallholder farmers. Business can be part of the solution or part of the
problem in these contexts and our case studies illustrate divergent approaches. In the case of
Malawi, we see a foreign institutional logic being imposed by multinational enterprises (MNEs)
due to pressures for more sustainable supply chains and the problems that smallholder farmers
have with compliance and therefore market participation; whilst in the case of Zambia we see
intermediaries trying to transcend institutional voids (or what Mair, Martí, & Ventresca (2012)
term as interfaces between different institutional orders) by embedding the new institutional logics
in local social structures.
Creating business linkages through market inclusivity and making markets work for the
poor is important to transform the fortunes of the rural poor where the majority of the world still
reside and where effective participation of the poor is hindered by the existence of institutional
voids (Mair, Martí, & Ventresca, 2012). We explore the prevalence of such voids and the role that
new institutional logics can play both positively or negatively as regards market access for
smallholder farmers - focusing on how these new institutional logics arise. These farmers are
confronted by significant transaction costs in trying to commercialize operations and to participate
in markets and they wield neither sufficient power to influence price nor advantageous market
knowledge and thus often self-select out of markets and continue with their subsistence methods
of farming (Sartorius & Kirsten, 2007).
The research demonstrates the tension that multiple institutional logics can create
especially amongst those most vulnerable. It contributes to our understanding of poverty
alleviation in developing regions (Saripalli & Chawan, 2017), on overcoming institutional voids,

3
market inclusivity and the role of social entrepreneurs and intermediaries (Pärenson, 2011), builds
on the perspective of markets as social spaces for economic exchange (Bourdieu, 2005; Zelizer,
1979, 2013), and the development of African management solutions that are cognizant of the
importance of embedding business solutions in social realities (Luiz, Ganson, & Wennmann, 2019;
Seny Kan, Apitsa, & Adegbite, 2015). By focusing on how new institutional logics emerge we
contribute towards our understanding of the impact of embeddedness, or the lack thereof, on
institutional processes and institutional change, and how these affect local market actors (Hanekom
& Luiz, 2017).
The paper is structured as follows. The literature review presents alternate approaches to
markets from a transaction cost, new institutional economics (NIE) perspective and from a social
construct perspective. Furthermore, we examine these two strands in the context of multiple
institutional logics and how to reconcile these approaches. Section 3 presents the research
methodology. This is followed by the findings and discussion of our two case studies and their
institutional logics. Section 5 concludes and outlines areas for future research.
2. Literature review
2.1 Institutional voids and logics in rural developing markets
From a new institutional economics perspective (NIE), markets are bundles of institutions
that provide a platform for social and economic exchange of goods and services (North, 1990).
Markets require good governance but also inclusive political and economic institutions. These
institutions play a significant role in regulating transaction costs within markets and this
incentivizes the economic actors to participate through productive activities. Weak institutions
result in high and unpredictable transaction costs thereby reducing market access and dis-

4
incentivizing the market actors from future participation (Khanna & Palepu, 1997). In addition to
market exclusion, weak institutions result in the formation of institutional voids through empty
spaces(Mair et al., 2012).
In emerging markets, these institutional voids may affect exchanges at all stages of the
supply chain from the raw material sourcing, to manufacturing, distribution, and the sales and
marketing stages (Parmigiani et al., 2015). Khanna and Palepu (1997) identify five categories of
institutional voids that affect supply chains in emerging markets, namely product markets voids,
labor markets voids, capital market voids, regulatory voids, and contracting voids. The existence
and prevalence of these voids depends on the stage of the supply chain at which the market
exchanges are taking place. These voids tend to be severe in subsistence markets where formal
institutions are often most ineffective and affected by corruption (Khanna & Palepu, 1997).
Furthermore, in these environments, informal institutions like traditional rulers often wield
influence and are able to formulate their own rules which further compound the unpredictability
of the regulatory framework (Parmigiani et al., 2015).
Exchanges in emerging markets are frequently challenged by the difficulty of enforcing
formal contracts. Whilst in developed countries, companies rely on strong institutions and formal
contracting to protect their resources and technology and thereby maintain a competitive edge, in
developing countries because of the high transaction costs and inefficiencies associated with the
enforcement of contracts, market actors habitually develop their own set of informal institutions
to counter these costs. They thereby develop an alternative institutional logic.
Market players in developing countries learn to improvise and make do with whatever is
at hand and engage in entrepreneurial activity through bricolage (Chikweche & Fletcher, 2017;
Mair and Marti, 2009). In these extreme settings, bricolage and cultural entrepreneurship are

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Cites background from "Negotiating new institutional logic..."

  • ...Arguably, large parts of Africa are characterised by weak institutions (Ahen and Amankwah-Amoah, 2018; Amaeshi et al. 2016; Luiz et al. 2019)....

    [...]

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Abstract: Our objective is to advance the understanding of the nexus between business environment reform (BER) and conflict, fragility, and underdevelopment. We examine the evidence and the lessons of BER in fragile and conflict-affected states (FCAS), based on the experience of four African countries (Rwanda, Sierra Leone, Uganda, and Ethiopia) that have or are transitioning from a fragile environment to greater stability and more sustained economic growth. We use a qualitative case study approach that draws on several data sources to inform its analysis, including one-on-one interviews, roundtable focus groups, and an analysis of documents, reports, and data. A total of 83 respondents participated in our research. We develop a systems approach rather than a transactional approach to recognize the complex network of interconnected and interacting business interests, agendas, and systems in FCAS. We argue that BER has the greatest potential to advance achievement of sustainable development when it is attentive to three objectives at the same time: stimulating broad-based economic growth, expanding economic opportunity in formal and informal markets, and addressing drivers of conflict and fragility. The implications for international businesses entering or operating in FCAS are substantial and may require atypical capabilities.

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TL;DR: In this paper , the authors explore the role that organizations and institutions play in reproducing inequality even after significant political transitions intended to undermine the sources of such inequality and reveal how incomplete institutional transitions may give rise to contradictory institutional logics and how this can contribute to high levels of contestation as actors and organizations vie to maintain, disrupt, and create new institutions.
Abstract: This study explores the role that organizations and institutions play in reproducing inequality even after significant political transitions intended to undermine the sources of such inequality. Our analysis reveals how incomplete institutional transitions may give rise to contradictory institutional logics and how this can contribute to high levels of contestation as actors and organizations vie to maintain, disrupt, and create new institutions. We analyse the dynamics of a conflict set within a broader institutional contestation in post-apartheid South Africa by examining the farmworkers strike and unrest of 2012. We expose a complex interlocking system of exploitation and oppression at micro, meso, and macro institutional levels and highlight misalignments between de facto and de jure institutional environments. Our study shows how actors and organizations can exhibit and constrain agency legitimating the unequal access to resources and opportunities and why this can result in the persistence of inequality.

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References
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Journal Article

2,357 citations


"Negotiating new institutional logic..." refers background in this paper

  • ...Khanna and Palepu (1997) identify five categories of institutional voids that affect supply chains in emerging markets, namely product markets voids, labor markets voids, capital market voids, regulatory voids, and contracting voids....

    [...]

  • ...These voids tend to be severe in subsistence markets where formal institutions are often most ineffective and affected by corruption (Khanna & Palepu, 1997)....

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TL;DR: In this article, the Foundations of Petit Bourgeois Suffering and the Foundational Principles of an Economic Anthropology are discussed, as well as a contract under duress and the construction of the market.
Abstract: Introduction. Part I The House Market. Chapter 1 Dispositions of the Agents and the Structure of the Field of Reproduction. Chapter 2 --The State and the Construction of the Market. Chapter 3 -- The Field of Local Powers. Chapter 4 -- A Contract under Duress. Conclusion -- The Foundations of Petit Bourgeois Suffering. Part II Principles of an Economic Anthropology. Postscript -- From the National to the International Field. Notes. Index.

1,132 citations


"Negotiating new institutional logic..." refers background in this paper

  • ...…regions (Saripalli & Chawan, 2017), on overcoming institutional voids, on the perspective of markets as social spaces for economic exchange (Bourdieu, 2005; Zelizer, 1979, 2013), and the development of African management solutions that are cognizant of the importance of embedding business…...

    [...]

  • ...market inclusivity and the role of social entrepreneurs and intermediaries (Pärenson, 2011), builds on the perspective of markets as social spaces for economic exchange (Bourdieu, 2005; Zelizer, 1979, 2013), and the development of African management solutions that are cognizant of the importance of embedding business solutions in social realities (Luiz, Ganson, & Wennmann, 2019; Seny Kan, Apitsa, & Adegbite, 2015)....

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Journal ArticleDOI
TL;DR: The authors examines in microcosm such institutional voids and illustrates the activities of an entrepreneurial actor in rural Bangladesh aimed at addressing them, and depicts the crafting of new institutional arrangements as an ongoing process of bricolage and unveil its political nature as well as its potentially negative consequences.

1,033 citations

Posted Content
TL;DR: In this article, the authors uncover institutional voids as the source of market exclusion and identify two sets of activities: redefining market architecture and legitimizing new actors as critical for building "inclusive" markets.
Abstract: Much effort goes into building markets as a tool for economic and social development, often overlooking that in too many places social exclusion and poverty prevent many, especially women, from participating in and accessing markets. Building on data from rural Bangladesh and analyzing the work of a prominent intermediary organization, we uncover institutional voids as the source of market exclusion and identify two sets of activities – redefining market architecture and legitimating new actors – as critical for building ‘inclusive' markets. We expose voids as ‘analytical spaces' and illustrate how they result from conflict and contradiction among institutional ‘bits and pieces' from local political, community, and religious spheres. Our findings put forward a perspective on market building that highlights the ‘on the ground' dynamics and attends to the ‘institutions at play', to their consequences, and to a more diverse set of ‘inhabitants' of institutions.

739 citations

Journal ArticleDOI
TL;DR: In this paper, the authors uncover institutional voids as the source of market exclusion and identify two sets of activities: redefining market architecture and legitimating new actors as critical for building "inclusive" markets.
Abstract: Much effort goes into building markets as a tool for economic and social development, often overlooking that in too many places social exclusion and poverty prevent many, especially women, from participating in and accessing markets. Building on data from rural Bangladesh and analyzing the work of a prominent intermediary organization, we uncover institutional voids as the source of market exclusion and identify two sets of activities – redefining market architecture and legitimating new actors – as critical for building ‘inclusive’ markets. We expose voids as ‘analytical spaces’ and illustrate how they result from conflict and contradiction among institutional ‘bits and pieces’ from local political, community, and religious spheres. Our findings put forward a perspective on market building that highlights the ‘on the ground’ dynamics and attends to the ‘institutions at play’, to their consequences, and to a more diverse set of ‘inhabitants’ of institutions.

719 citations

Frequently Asked Questions (16)
Q1. What are the main reasons for the marginalization of smallholder farmers?

The global nature of the tobacco market and the relativelyoligopolistic structure of the large tobacco companies result in buyers seeking to transact with market actors that provide predictability and security and this tends to be the large estate growers resulting in the marginalization of smallholder farmers. 

In Zambia, a total of fifteen respondents participated in this study comprising five private sector intermediaries, six smallholder farmers, three NGOs involved in agriculture andlasted between one and three hours. 

Prior to the STP, the Agricultural Research and Extension Trust (ARET) was central to theformulation and dispensation of key messages for the farmers in coordination with farmer associations and government extension workers. 

Farmers also rely on club structures (smallholder farming groups of seven to 10) to dampen the impact of capital voids which provide some insurance through pooling of risk and resources. 

Abrupt changes in Malawi’s tobacco regulations started in the early 1990s as a result of the World Bank’s structural adjustment programs which abruptly liberalized the sector and cut government support. 

Under the IPS, buyers initiallycountered the capital market voids and a lack of accessibility to smallholder farmers by linking their farmers with financial institutions which provide the farmers with loans in the form of inputs. 

As a result of international developments in tobacco markets including the growinginfluence of the anti-tobacco lobby and increased litigation against leading tobacco manufacturers in developed countries, the tobacco industry has tried to improve its image and has pursued the Sustainable Tobacco Program (STP). 

4. Research findings and discussionMalawi is Africa’s largest exporter of burley tobacco supplying close to 82% of the burleytobacco exported from the continent. 

Parmalat is an agro-processor that collaborates with smallholder farmers through NGOs that seek to build capacity with cooperatives. 

Khanna and Palepu (1997) identify five categories of institutional voids that affect supply chains in emerging markets, namely product markets voids, labor markets voids, capital market voids, regulatory voids, and contracting voids. 

In addition to the farmers and the buyers, other actors that were deemed relevant to this study were the Tobacco Control Commission, which is a state institution responsible for tobacco industry activities, farmer associations, and the market operators (see Table 1 for a list of respondents). 

Part of the reason for this comes from the lack of recognition of indigenous institutions and how the imposition of new institutional pressures may weaken these traditional institutions and leave farmers even more vulnerable. 

In attempting to deal with the information asymmetry buyers are employing supplier management activities that are further negatively affecting the smallholder farmer through market exclusion: 

Selling of tobacco at the floors takes two formats – the American auction system and thecontract/silent marketing system (Malawi tobacco industry, 2016). 

These cooperatives operate as viable institutions and they link private off-takers with the smallholder farmers and are able to talk the same business language (Markelova & Mwangi, 2010). 

As the authors discuss in 4.1.2 the imposition of the STP has changed the institutional dynamics in tobacco farming in Malawi and has affected smallholder farmers particularly adversely as they are the least able to adapt to these new requirements. 

Trending Questions (1)
How do smallholder farmers access in Zambia?

Smallholder farmers in Zambia access markets through collective actions, such as organizing themselves into effective farmer groups and receiving support from intermediaries.