Analyzing Alibaba’s Magic

Can innovations come from China? Some influential people don’t think so. Today, of course, Alibaba is the Chinese innovator that clearly stands out. This paper argues that Alibaba’s impressive rise as a leading innovator on the world stage was driven in no small way by the institutional voids that challenge other firms in the same business environment. Alibaba not only thrived in an institutional void, it was a filler of institutional voids. Alibaba’s success has been attributed to factors including the massive size and rapid growth of the Chinese market, an influx of foreign capital, and an ingenious mix of Chinese and Western business systems. However, there are four reasons why China’s institutional void effect cannot be ignored: Alibaba received selective government support, experienced a strong CEO effect, strongly fit the paradigm shift to e-commerce, and accrued great benefits through ecosystem development. Arguably, developing a broad business ecosystem offers more benefits in an environment with institutional voids. One key tenet of an institutional void is the lack of market information—both for consumers and for businesses—which inhibits effective business operations. However, Alibaba became an “infomediary” for consumers by collecting information to help them make informed shopping decisions. Alibaba then collected consumer behaviour data from its online ecosystem, which is expected to have a significant impact on China’s business world and society.

• institutional voids
• Chinese innovation
• Alibaba
• Jack Ma