Connecting poverty to purchase in informal markets

Abstract

Base-of-the-Pyramid (BoP) enterprises seek to serve impoverished customers in informal markets. While BoP enterprises have grown in prominence, comparatively little multidimensional theoretical work has explored why these customers ultimately elect to purchase their products. Using a sample of 555 potential customers in rural India, our results indicate that the influence of different dimensions of poverty on likelihood of purchase is largely a function of the strength of the formal institutional environment. Specifically, stronger formal institutional environments can act as both a complement to, and a substitute for, the influence of individual- and network-level norms on purchasing decisions in informal markets. © 2014 Strategic Management Society.