Small firms' non-market strategies in response to dysfunctional institutional settings of emerging markets

Abstract

Institutional settings in emerging markets are often plagued by state actors exploiting the vulnerability of resource-constrained small and medium sized enterprises (SMEs). Whilst we know a great deal about how large firms use non-market strategies (NMS) to navigate such institutional spaces, current knowledge of such strategies in connection with SMEs remains limited. Using in-depth interview data from a wide range of actors in Russia, we reveal the predatory behavior of state actors and how, in response, SMEs develop NMS to respond to fluctuating institutional conditions. We underline four forms of institutional predatory behaviors comprising shifting the rules of the game; privatizing power; selectively using/abusing laws; and normalizing informalities. In turn, we identify how SMEs variously adopt NMS to tackle these predatory strategies; namely deflection, alliance, concealment and internationalization. We highlight how SMEs learn to navigate, and ultimately to overcome, dysfunctional and fragile institutional conditions of emerging markets through the pursuit of particular NMS.

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