Going above and beyond: How intermediaries enhance change in emerging economy institutions to facilitate small to medium enterprise development

• Author: Rui Torres de Oliveira,Kimberly M. Ellis,Juliet Oriaifo
• Date: 01 September 2020
• Published date: 01 September 2020
• DOI: http://doi.org/10.1002/sej.1349

SPECIAL ISSUE ARTICLE

Going above and beyond: How intermediaries

enhance change in emerging economy institutions

to facilitate small to medium enterprise

development

Juliet Oriaifo

1

| Rui Torres de Oliveira

2

| Kimberly M. Ellis

3

1

Willie A. Deese College of Business and Economics, North Carolina A&T State University, Greensboro, North Carolina, USA

2

Department of Management Programs, Queensland University of Technology, Brisbane, Queensland, Australia

3

Department of Management Programs, Florida Atlantic University, Boca Raton, Florida, USA

Correspondence

Juliet Oriaifo, Willie A. Deese College of Business

and Economics, North Carolina A&T State

University, Greensboro, North Carolina.

Email: joriaifo2016@fau.edu

Abstract

Research summary: Despite knowledge about the impor-

tance of intermediaries in filling institutional voids, we do

not understand how intermediaries facilitate institutional

change. This research demonstrates how intermediaries use

six rhetorical legitimation strategies—logos, ethos, pathos,

autopoiesis, teleological, and anthropos appeals—to influ-

ence institutional change in Abia State, Nigeria that facili-

tates small-to-medium-enterprise (SME) development in the

region. While the first five rhetorical legitimation strategies

are used in both developed and emerging economies, the

sixth strategy—anthropos appeals, which reflect the commu-

nal character of many African cultures—seems to be unique

in this context. Our findings contribute to the literature by

extending our understanding of the role of rhetorical legiti-

mation strategies in bringing about institutional change, use

of rhetoric to communicate entrepreneurial opportunities,

and significance of nonmarket strategies for SMEs.

[Correction added on 17 April 2020, after first online publication: Throughout the article, there have been changes made to grammar and structure to

improve clarity.]

Received: 15 February 2019 Revised: 1 February 2020 Accepted: 16 February 2020 Published on: 1 April 2020

DOI: 10.1002/sej.1349

© 2020 Strategic Management Society

Strategic Entrepreneurship Journal. 2020;14:501–531. wileyonlinelibrary.com/journal/sej 501

Managerial summary: SMEs influence economic develop-

ment in emerging economies but face many constraints. This

research examines how intermediaries help reduce con-

straints SMEs in Nigeria encounter by facilitating institutional

changes, through the use of six legitimation strategies (logos,

pathos, ethos, autopoiesis, teleological, and anthropos). Also,

this research explains how the institutional changes encour-

age the government to fill voids that generate beneficial out-

comes to SMEs, emergent local intermediaries, the general

public, and the government itself. Finally, this research finds

that market actors in Nigeria use an Anthropos legitimation

strategy when appealing to individuals in the local market to

help with SME development. This strategy, which taps into

the communal character of many African cultures and inter-

estingly has some parallels with Confucianism philosophy,

seems to be unique in emergingeconomies.

KEYWORDS

emerging economies, institutional change, intermediaries,

legitimation, nonmarket strategies, SME development.

1|INTRODUCTION

The emergence and development of small to medium enterprises (SMEs) in emerging economies (EEs) is particularly

difficult due to the weak formal institutional structures in place (Naudé, 2010). African SMEs are highly exposed to

weak institutional structures, thus making entrepreneurial activities in the region especially strenuous (George,

Corbishley, Khayesi, Haas, & Tihanyi, 2016; Naudé, 2010). Indeed, institutional support in emerging markets is often

scarce and stakeholders seem to accept the existence of intermediaries that insome ways are substitutes for institu-

tions. By addressing some institutional voids (Dutt et al., 2016; Khanna & Palepu, 2010), intermediaries in contexts

such as those on the African continent play significant roles in the emergence and development of SMEs. For exam-

ple, financial intermediaries create access to capital markets (Allen & Santomero, 1997), and open-systems intermedi-

aries provide technology to link suppliers and end users (Dutt et al., 2016).

However, some argue that if intermediaries are being legitimized by institutions (i.e., government institutions in

EEs), then they will have thepower to influence thedecisions and actions ofthese institutions. Yet,there is a dearth of

literature on how differentmarket agents, and intermediaries, in particular, influence institutions. Pastinstitutional the-

ory literature is very much concerned with howinstitutions influence market agents(North, 1990; Scott, 2001), or how

market agents substitute for inefficient market-supporting institutions (Dutt et al., 2016; Mair & Martí, 2009; Mair,

Martí, & Ventresca, 2012; McCarthy & Puffer,2016), but it does not addresshow market agents influence institutional

change.For example, extant discussions on the interplaybetween institutionsand intermediariesfocus on how interme-

diariesfill voids within the institutional environment, thusimproving conditionsthat firm ownersface (Dutt et al., 2016).

Despite the fact that institutional theory is used to understand the development of intermediaries and how they

fill institutional voids, the literature is almost nonexistent on how intermediaries become agents of institutional

change and how this institutional change further fills institutional voids. Indeed, with the existence of weak

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