Bridging the Institutional Divide: Partnerships in Subsistence Markets

Abstract

The paper analyzes the impact of institutions on the structure of partnerships in subsistence markets (SMs). Grounded in institutional theory and transaction cost economics, the reasoning suggests that partnerships will adapt to the co-existence of SM-specific and external institutions in SMs. SM partnerships will include multiple partners from multiple sectors, each compensating for different institutional gaps in SMs. They will replace governance mechanisms discussed in the literature, such as formal contracts and equity, with substitutes better suited to SM contexts, including informal contracts, in-kind contributions, and gifts. The importance of these mechanisms will depend on the institutional distance between SM-specific and external institutions. Finally, different governance mechanisms will co-exist within the same partnership, as partners originating in the SM will rely on SM-specific institutions, while partners originating outside the SM will prefer to rely on external institutions where possible.

Keywords: subsistence markets, subsistence marketplaces, cross-sector partnerships, base of the pyramid, bottom of the pyramid, institutions, regulation, poverty

JEL Classification: D21, F23, G38, H11, H7, I39, L1, L2, L31, M1, M21, O17