Entering dangerous territory: Why corporate investment is sometimes attracted to institutional voids

Vinit M. Desai

International Business Review, 2025, vol. 34, issue 2

Abstract: Institutional voids describe settings with weak market arrangements. While these voids can deter corporate investment, some organizations seek these challenging environments. Why is that so? This paper addresses the question by suggesting that while voids pose risks, they can also provide competitive and institutional flexibility. The study’s framework suggests that firms are attracted to weak institutional environments with tolerable risks, and also counterintuitively less deterred when these risks rise to extremely high levels. Empirically, the study examines global oceanic shipping patterns to determine whether and how commercial shippers change course in response to maritime piracy incidents such as hijackings and thefts against their vessels, as these incidents typically occur offshore from countries with weak institutional structures. Interestingly, although piracy generally deters oceanic shipping, findings support the study’s predictions that companies make exceptions to continue accessing markets with relatively tolerable or extremely high risks.

Keywords: Institutional voids; Corporate investment; Cross-border shipping; Maritime piracy (search for similar items in EconPapers)
Date: 2025
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DOI: 10.1016/j.ibusrev.2024.102384

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