Postcolonialism, Policy Struggles, and Institutional Voids: A Historical Study of India’s License Raj Era (1947 – 1991)

Over the past three decades, International Business literature has increasingly emphasized the role of institutions in understanding multinational activities, particularly in emerging economies. A key concept within this scholarship is "institutional voids"—the absence or underdevelopment of formal institutions critical for enabling business activities and market transactions. However, contemporary scholarship, rooted in institutional theory and transaction cost economics, predominantly examines how businesses deploy strategies to navigate institutional voids while paying little to no attention to their historical origins, evolution, and the contexts in which they emerge. This paper critically re-evaluates the concept of institutional voids in emerging economies, challenging the narrow focus on their absence as a static and linear construct. By integrating perspectives from history and political science into international business and business history scholarship, this interdisciplinary study broadens the theoretical lens and introduces a novel conceptual framework. Grounded in a historical perspective, it argues that the emergence, integration, and persistence of these voids in emerging economies are deeply rooted in the volatile political and policy dynamics that characterized these economies during the postcolonial epoch—spanning the transition from colonial rule/decolonization after the Second World War to the advent of globalization in the 1990s. In line with this, the paper’s contextual case study focuses on India’s postcolonial period, specifically the "License Raj" era, which spanned from Indian independence in 1947 to the liberalization of the Indian economy in 1991. Using a qualitative, archival-based approach, it explores how over four decades of governance under the ideological shifts of a single political dynasty—the Nehru-Gandhi family—and their erratic policy objectives, inconsistent execution, and decision-making processes contributed to the creation, integration, and prolongation of institutional voids in the Indian market. By foregrounding the critical but underexplored roles of history and politics in shaping these voids, this study advocates for a more nuanced, integrative approach to future research, offering a richer understanding of institutional evolution and void creation in emerging economies.