In emerging economies, the institutional infrastructure to support market-driven economies and provide basic services often falls short. Institutional development is a complex process, dependent upon specific factors related to the historical, social, and cultural forces shaping the country or region in question.The most important factor in a market economy is the ability of buyers and sellers to find one another and complete transactions as seamlessly as possible. Institutional voids are the gaps that exist in specific markets that serve as inconveniences to the ideal interactions and transactions of buyers and sellers. Institutional voids come in a variety of forms: absent or unreliable sources of information related to the market as a whole, uncertain regulatory or intellectual property regimes, and inefficient judicial apparatus are just some possible examples. Although institutional voids are tangible hindrances to effective transactions and the rapid increase of beneficial services (such as reliable healthcare), they are also opportunities for entrepreneurial involvement.
Institutional Voids in the context of health
Tarun Khanna from Harvard Business School talks about Institutional Voids by comparing the quality of your health in a first-world country to other poorer countries. Living in the former would make you ask around for the best doctor in the area, and you have the CHOICE to pick what doctor you would like to be treated by and on top of that you have the support of a variety of institutional mechanisms that would ensure the quality of the doctor you were seeing was sufficiently high, so as to reassure you that your care was being put in a capable person's hands - not just a competent professional but a genuinely good ethical person. Whereas, on the other side of the world, you do not have enough information to make that exact same CHOICE. The only way you would be able to access high quality healthcare would be by asking friends and family and even then there are still huge issues such as the one of geographical distance (the hospital that provides reliable care could be up to a hundred miles away from their rural village) and the issue of price as basic operations that are needed due to their poor living conditions costs several years worth of wages which decreases quality of life further decreasing the average life expectancy. The only loophole of this is if you are part of the privileged class so people in first world countries should not take institutional voids for granted as in third world countries "A doctor can't find his patient, and a patient can't find his doctor. And that's a problem."
The problems don't stop there. There are many institutional voids that complicate the appropriate delivery of health care. We are going to stay with the same analogy of finding which doctor you want to be treated by and let's assume that you find the doctor. Once you go to see them, how do you know that the facilities within which she's operating are basically kept clean? How do you know that the sterilisation in the facilities is appropriate? Labour is cheap in many developing countries but the most basic things - maybe their hands won't be sterilised themselves. I don't have any ability to ensure that the facility in which I'm being treated is adequately maintained and there's no reassurance by the institutional mechanisms that ensure the quality of the doctors and the facilities is sufficiently high .
You can easily imagine that a variety of health care providers could make a fair amount of money by adulterating the medicines or by delivering fake medicines. And we know from global intellectual property estimates, policing estimates, that the problem of piracy of drugs is rampant. You are going to be sceptical because how are you meant to know that the facilities are hygienic and up to standard for you to be operated on? Now, again, in your backyard in your first world country, you would have complete reassurance that your facilities are hygienic. The penalties for somebody adulterating drugs or misrepresenting the chemical composition of something that they're about to put into your body are so severe and the adjudication mechanisms available to you if you have a legal dispute, God forbid, goes wrong with you are so well established, that I think even somebody who was inclined to behave ethically would think twice, thrice, 10 times over before he or she did something like that. So there are mechanisms here that protect the patient, reassure the patient, and therefore make it much more likely that their health transaction will occur. Those mechanisms are missing in most developing countries or are inadequately developed. Even if there are rules on the books, they're not adequately enforced and maintained and updated and etcetera, etcetera.
There isn't a machinery that exists to do all that. And that, again, is an institutional void. Remember, I spoke about information being missing that prevents the doctors and patients from finding each other? You also have this basic problem of ensuring the sanctity of that health transaction. That when that transaction occurs, when you go and pay for services or receive services, receive medication, you need to be reassured that that transaction is happening the way it's supposed to be happening. You need to be reassured that the drugs that you're taking are doing what they're represented to be doing. And you also need to be sure that if something goes wrong, that you have a redress mechanism, an adjudication mechanism, someone that you can go to, a regulator, an ombudsman, a patient's advocate to name a few. These are all things that exist in your backyard in your first-world country. But they don't exist in other parts of the world. And that, again, is a collection of institutional voids that complicate this transaction.