Small businesses encounter challenges in creating social and economic value within base-of-the-pyramid (BoP) settings, where informal structures thrive but formal institutions are ineffective. While existing studies have explored strategies to fill formal institutional gaps, this research explores how digital platforms can support informal transactions to promote value creation.
This study collected face-to-face survey data from 197 small family-owned retail shops in Pakistan. Building hypotheses on relational mechanisms in informal institutional settings, the authors analysed the data using a covariance-based structural equation model.
The structural equation model reveals that the transactional efficiency of informal arrangements mediates the relationship between digital platforms and formal voids. Substituting formal institutions enables shop owners to capture both economic and social value.
This research offers an alternative to the current approach of filling formal institutional voids in BoP contexts. The authors show that strengthening informal relationships that increase the efficiency of transactions helps strengthen small shop owners’ value creation.
The findings challenge the prevailing view that the economic inclusion of marginalised actors, like micro-entrepreneurs in BoP contexts, should rely on Western market principles.
This research offers a contextualised approach to item development and quantitative data collection in BoP settings to ensure the research’s rigour.
