The firm as an architect of polycentric governance: Building open institutional infrastructure in emerging markets

Abstract Research Summary We apply pattern‐matching techniques to contrast qualitative case study data with perspectives from strategic management and institutional economics about how a firm can address voids in market‐based institutions. We identify a novel approach whereby the firm builds an open institutional infrastructure (OII) by investing in a pool of resources widely accessible beyond its exchange partners. To collectively govern OII, the firm must empower other actors within multilateral cross‐sector partnerships, and it must enforce the resulting rules through relational norms based on alignment between public and private value creation. These findings, achieved by adapting Elinor Ostrom's principles of polycentric governance to corporate actors who take the lead in building OII, advance our understanding of new organizational forms that transcend the traditional boundaries of firms and markets. Managerial Summary Emerging markets typically present additional obstacles for business operations because they lack the necessary underlying institutional infrastructure such as access to capital and labor markets. We introduce a new way for firms to overcome these obstacles—which we call building an OII—by investing in such infrastructure themselves and making it available to their commercial partners, local communities, and even to competitors. Firms must empower those actors to take the lead in collectively defining the rules for accessing this infrastructure, by orchestrating cross‐sector partnerships. This process creates relational norms around the alignment of public and private interests, which ultimately can promote firms' competitive advantage.