Daniel Friel (Universidad de San Andrés)
Institution-based theory in business administration and the varieties of capitalism approach in political science contend that firms overcome institutional challenges in emerging markets through vertical integration. Although both of these approaches provide descriptions of how apparent institutional deficiencies in emerging markets cause firms to pursue vertical integration, neither of them explores either potential alternatives to this strategy or how development could potentially arise from firms compensating for institutional difficulties. This paper builds on recent developments in neoinstitutional theory that emphasize how actors attempt to shape their institutional context even as they are being shaped by it. Previous versions of neoinstitutional theory either contend that the formation of institutions is not influenced by previous institutions or that they are determined by existing ones. This paper argues that institutional change is path-dependent, albeit in a manner which is derived from firms, either collectively or individually, drawing on recessive institutions to forge new strategies. Recessive institutions are latent organizations, practices, customs and habits that have largely been forgotten or unused but which were dominant in the past. This paper demonstrates how a public/private organization in the wine sector and a private farm management company rely on the recessive institution of cooperatives to address institutional deficiencies. This paper coins the terms broker and multi-broker coordinated networks to describe how this organization and this firm, respectively, use this recessive institution to form a functional equivalent to vertical integration in order to address institutional challenges. These networks consist of institutional entrepreneurs that use institutional bricolage to combine dominant institutions with recessive ones to form a comparative institutional advantage. This paper concludes by exploring how the theory developed herein can explain institutional change and possibilities for development in Argentina and perhaps in other countries in Latin America. It is argued that development could occur through the diffusion of such strategies within and between industries, thereby creating new dominant institutions from the bottom up.
