From Ideals to Institutions: Institutional Entrepreneurship in Mexican Small Business Finance

Abstract:     
This paper analyzes the creation of the market for small business credit in Mexico, which presents a rare opportunity to explore the mechanisms of institutional entrepreneurship. The paper analyzes successful and unsuccessful attempts to activate small business lending to determine the organizational, structural, and personal aspects that allowed certain groups of individuals and not others to succeed. The paper proposes that, contrary to conventional thought, institutional change is not rare because institutional entrepreneurs are scarce. In fact, they are quite prevalent. What keeps most institutional entrepreneurs hidden from view is preference falsification, or the distinction that institutions function through the coordination of common beliefs, while private beliefs can diverge wildly. A central challenge of institutional entrepreneurship, therefore, is the transformation of the private beliefs of a few into common beliefs that can support new institutions. The paper argues that institutional entrepreneurship, while common, seldom succeeds because it entails a sequence of relatively unlikely events, including the recognition of an opportunity, the execution of organizational experiments, and the creation of public knowledge. Each stage of institutional entrepreneurship requires a combination of personal and structural qualities that are rarely found in a single individual, which explains why so few of them succeed.

Number of Pages in PDF File: 70

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