Institutional Innovation and Change in Value Chain Development

Holly A. Ritchie

• Editore: Routledge
• Anno: 2016
• ISBN:
  9781317404057
• Edizione: 1
• Argomento: Commerce
• Categoria: Commerce Général

George Bernard Shaw once said that reasonable people adapt themselves to the world but unreasonable people adapt the world to themselves. In a sense, this book explores how these so-called 'unreasonable people' may interact to re-fashion the world around them in fragile economic development. Drawing on empirical research in the volatile and traditional context of Afghanistan, the study investigates the challenge of poor women's participation in business and diverse outcomes for local development.

Institutional Innovation and Change in Value Chain Development takes a unique look at nuanced institutional phenomena through the lens of social institutions, with a subtle appreciation of the interaction of structure and agency. Drawing on in-depth qualitative research in Afghanistan, the case studies specifically investigate the transformation of the women's norm of purdah, and the subsequent development of new market institutions in three women's enterprises.

Shedding new light on the opaque process of institutional change, the research shows that external actors (such as NGOs) can both initiate and guide institutional development in fragile environments. Yet there may be limitations to their endeavours, with strong resistance from local power holders. Meanwhile, dominant entrepreneurs are shown to play a major role in fostering institutional development pathways. This influences the scope of inclusion and exclusion in enterprise and value chains, and broader streams of socio-economic development.

1
Exploring institutional complexity in a less formal context

George Bernard Shaw once said that reasonable people adapt themselves to the world but unreasonable people adapt the world to themselves. Thus all progress must depend on unreasonable people. In a sense, this book explores how these ‘unreasonable people’ may interact to remould and refashion the world around them through the lens of institutional change. In this opening chapter, I consider evolving discussions on ‘institutions’, towards investigating in-depth institutional processes in women’s enterprise in the context of Afghanistan. I present the overall framework for the study, emphasising the epistemological departure, and guiding research themes. I reflect on the methodological techniques and fieldwork in the fragile and war-stricken Afghan setting. Introducing the research cases, I finally give a brief overview of the specific businesses featured in this book, describing their background, situation and reasons for selection. Looking ahead, I discuss the emerging book structure and arguments.

1.1 Institutions and institutional processes

Institutions shape human behaviour and provide structure in society, including critical mechanisms for decision-making. Across the social sciences, broad debates have spurred various theories of institutions and process of change, ranging from the narrow economist perspectives to more progressive evolutionary-oriented understandings of institutional change. Significantly, the institutional discourse has also broached more complex theoretical discussions, including the various effects of ‘structure and agency’. In exploring micro-institutional processes in this book, particularly in a less formal context, I highlight the influence of social and cultural and political institutions in the development of new (economic) institutions, and the need to integrate a careful and more subtle examination of structure and agency.

1.1.1 What do we mean by institutions?

While central to human societies, there is still little consensus on a common definition of institutions or how we may do institutional analysis (Hollingsworth, 2002). Academic disciplines have tended to develop their own approaches to discussing and examining institutions and there is little collaborative learning. These include several approaches by economists (e.g. Williamson, 1985; Hodgson, 1988, 1998, 1999, 2003, 2007; North, 1990); political scientists, sociologists and historians (e.g. Ostrom, 1990; Campbell et al., 1991; Powell and DiMaggio, 1991; Hall and Taylor, 1996; Chang, 2002); and anthropologists (e.g. Geertz, 1995). More recently, the field of organisation studies has also been drawn to institutional theories (e.g. Greenwood and Hinings, 1996, 2006; Stern and Barley, 1996; Greenwood et al., 2002; Battilana et al., 2009, 2012).

From the dominant institutional economics, Douglass North famously defined formal and informal institutions as the ‘rules of the game’ (North, 1990: 4). Viewing institutions as ‘constraints’, he described these as the framework structuring human interaction, and the incentives and disincentives to behave in certain ways. This includes the rules themselves, enforcement mechanisms, and norms of behaviour. Formal rules are described to include laws, constitutions and regulations; and these are specific and codified. Informal rules incorporate unwritten norms, conventions and moral codes of conduct (e.g. taboos, standards of behaviour), and may include gender-based norms, land inheritance customs and local trust-based credit systems. The enforcement of rules refers to the costs in measuring the performance of agents or the characteristics of goods and services in addition to the terms of exchange. These are considered non-existent in a neoclassical perfect world (North, 1989: 1321). Meanwhile, with an emphasis on coordination, Ostrom (2005: 3) defined institutions as ‘prescriptions’ that are used to organise ‘all forms of repetitive and structured interactions’ within families, communities, organisations and markets, across social, cultural, political and economic realms. In the economic arena, Hollingsworth and Boyer (1997) described the notion of ‘institutional arrangements’ to capture the (multi) coordination of various economic actors (‘governance’ mechanisms) by markets, hierarchies and networks, associations, the state, communities and clans.

Taking a more sociological approach, Fligstein (2001: 108) described institutions as both rules and ‘shared meanings’ that ‘define social relationships, help define who occupies what position in those relationships, and guide interactions by giving actors cognitive frames or sets of meanings to interpret the behaviour of others’. Drawing off these broader views, from an evolutionary perspective, Hodgson suggests that institutions are structures that are both external to individuals, as well as ‘ideas’ inside the mind (Hodgson, 2004b: 424). Hodgson criticised North’s theory of institutions for definitional ambiguities, particularly related to informal and formal rules. Going beyond institutions as just rules or constraints, Hodgson redefines institutions as ‘durable systems of established and embedded social rules that structure social interactions … [that] both constrain and enable behaviour’ (ibid.). The rule refers to ‘an injunction or disposition’, including norms of behaviour and conventions as well as formal rules: ‘in circumstances X do Y’. Hodgson contends that rule durability comes through the capacity of institutions to ‘create stable expectations of the behaviour of others’ and thus permit (but not be reducible to) ‘ordered thought, expectation and action’ (ibid.).

1.1.2 Exploring institutional complexity in a fragile context

In turning to the challenging topic of institutional change, social scientists have indicated the existence of complex dynamics involving the interplay of structure and agency (e.g. Ostrom, 1990; Chang and Evans, 2000; Hodgson, 2004b). Crossing into fields such as management, Koene (2006) highlights the varied influence of the context – affected by local pressures, societal confidence and agent power – and the potential behaviour of agents affecting institutional change and outcomes. In recent years, social, cultural and political institutions have been given more weight across the institutional debate towards a greater appreciation of non-economic forces in institutional processes, going beyond the narrow notions of efficiency and rationality. This has included the influence of culture and power in institutional emergence and design, the evolutionary nature of informal institutions (incorporating agents’ habits), and the socially embedded nature of economic action (the role of networks and relations). The various effects of structure and agency has been highlighted, drawing attention to social relations and power, and agent interests and preferences. Yet the process of institutional construction and development is still poorly understood, in part due to disciplinary compartmentalisation.

Contributing to a gap in the institutional theory, this book specifically endeavours to explore how existing institutions influence the construction of new market institutions, and how this affects evolving value chains in a less formal context. The theoretical framework draws from the broad institutional discourse with relevant insights from enterprise and value chain development. In particular, the enterprise literature has highlighted the role of entrepreneurs in the process of innovation, and their varied motivations and objectives. Meanwhile, with a strong focus on the participation of poor producers, the value chain¹ approach has been useful in studying links between market actors within market systems, drawing attention to power relations in the governance of value chains. But it has often stumbled on the ‘market complexities’ arising in more fragmented and informal contexts where markets remain exclusive (particularly for the poor and women), with strong power distortions. In such situations, it is the prior existence of dominant non-economic institutions that may influence the necessary development of market institutions.

In this study, the empirical research takes a practical look at institutional processes in emerging women’s businesses in the context of Afghanistan. Advancing theoretical understandings, the study elaborates on how actors navigate existing institutions to reshape the ‘rules of the game’ (institutions) through institutional construction in enterprise, at the cusp of value chain development. In particular, the research explores the uncertain role of women entrepreneurs and other actors in fostering new institutions to engage in new forms of enterprise, and ‘shades of initiative’ by different groups along a continuum to evolving institutions. These themes resonate as both relevant and significant in the informal and volatile research context of Afghanistan. A traditional and conservative society, gender-prescribed behaviour remains strong. Meanwhile, instability and conflict appear to be (almost) ‘institutionalised’ in society, and research indicates that conflict has had a limited impact on the prevalence of enterprise activity (Ciarli et al., 2009: 2). A great deal of effort has been channelled into ‘pro-poor enterprise and value chain’ development by the government and aid agencies with varying degrees of success and failure. Baumol (1990) suggests entrepreneurship may have varied outcomes for economic development, and distinguished bet ween productive, unproductive and destructive activities. This study looks at the underlying nature of enterprise through a ‘nuanced’ institutional lens to better understand economic development ‘pathways’, particularly in a traditional and fragile environment.

1.2 A critical realist lens with tools from development studies

To investigate the unusual phenomenon of poorer women’s businesses in Afghanistan and institutional change, the research took a strong focus on understanding the interaction of structure and agency. This aimed to generate new insights into the influence of existing sociocultural institutions, prevailing politics and the dynamic role of actors in the emergence of new market institutions. In appreciating these deeper yet unknown institutional processes, the research strived to initially find an epistemological departure that allowed for both a suitable research approach and interpretation that could provide pertinent theoretical insights into institutional processes – in vein with key thinkers such as Geoff Hodgson – yet also aligned to the emerging field of development with useful insights for practice.

Development studies is a recent distinctive branch of the social sciences concerned with understanding the poor in developing countries. Challenged by the need to incorporate both natural and social phenomena within its domain of inquiry, studies have traversed different ontologies exploring research objectivity, methodologies and approaches (Sumner and Tribe, 2004). Adopting an epistemological approach that best suits the key themes and type of investigation is viewed as critical in rigorous development research, as well as ensuring an appropriate mix of quantitative and qualitative methods/techniques in conjunction with a ‘reflective practitioner approach’. To this end, with the focus on examining less known social phenomena and the interplay between structure and agency, the research herein sought an ‘exploratory’ in-depth approach, and finally identified the useful lens of critical realism.

1.2.1 Building knowledge through making sense of reality

As a reaction to postmodernism, and with the demise of the dominance of logical positivism, the critical realist perspective emerged in the 1970s with roots in Marxism and social economy (Polanyi, 1944). Advocated by Bhaskar (1975), critical realism endeavoured to present a normative model for the social sciences, describing the interface between the natural and social worlds. The approach emphasises layered ‘open’ realities, which may be understood through transitive objects of knowledge (facts, methods, theories) and intransitive objects of knowledge (‘real’ events, structures and mechanisms in the world) (Baert, 2005: 91). Knowledge production is conceived through retroduction, with reality assessed through a broad range of methods and sources. Going beyond the surface of action and events, the critical realist perspective underscores the ‘interplay between structural factors and individual agency’ and emphasises an interdisciplinary approach. The critical realist lens is argued to generate ontological depth in incorporating structure, causal mechanisms, and events within geohistorical contexts (Sayer, 2000: 15). Yet Baert (2005: 102) criticises this realist epistemology as still being trapped in a scientific (logical positivist) perspective that tries to fully explain and holistically map reality, in vein with a ‘spectator theory of knowledge’ (Dewey, 1938). However, a cluster of less orthodox economists such as Tony Lawson and Geoffrey Hodgson advocate the use of critical realism in institutional discourse. They have embraced this position as going beyond ‘closed’ positivist models that fail to incorporate dimensions of reality not immediately observable. Lawson (1997) suggests that the phenomena of the world can be better explained through reference to powers, mechanisms and related tendencies. He highlighted different levels of reality, including empirical (‘experience and impression’), actual (‘actual events and states of affairs’) and real (‘structures, powers, mechanisms, and tendencies’), towards generating a more holistic and penetrating picture of the world.

Drawing from social constructivism: language and power

Adopting this standpoint and responding to shortfalls of critical realism (Baert, 2005), the research for this study sought to integrate more nuanced processes and dynamics of power in an expanded critical realist approach. To this end, the research drew on tools from social construction, which builds on the philosophy of Berger and Luckmann (1966), and later Foucault, Knorr-Cetina and Latour. Departing from an empiricist/logical positivist confidence in a self-evident and objective truth where generalisations are sought, social construction emphasises the subtleties of the human condition, with a greater subjective/interpretative emphasis towards ‘quality’, not ‘quantity’, in research data. Social constructivism is concerned with the ways that reality is socially constructed in a dynamic process by both individuals and groups through the reproduction and negotiation of their interpretations of reality and knowledge of it: ‘we do not find or discover knowledge so much as we construct or makeit’ (Schwandt, 2000: 197). Such understandings are drawn from a set of shared values, practices and language. Also called ‘perspectivism’ (Fay, 1996), social constructivism holds that knowledge claims take place within a conceptual framework. Claiming closure is regarded with suspicion. The approach highlights the researcher as present in the research, and ‘values’ as part of the reality with subjectivity ‘celebrated’.

In appreciating some aspects of speech, discourse and context, the research s...