Favor prevalence in emerging markets: A multi-level analysis

Favors are a medium of exchange for social capital. Social capital creates social, political, and economic benefits for individuals, organizations, communities, and societies around the world. Favors promote cooperation between individuals and are used to bond individual actors with other individuals, groups, communities, and institutions. Favors are prevalent in business in emerging markets because of the presence of institutional voids, limited social and geographic mobility, and strong reciprocity norms. Favors create benefits and liabilities for business organizations and their networks. They produce outcomes beyond the favor exchange process that can be characterized as productive or perverse. Despite their prevalence and importance, favors and their dynamics are not well understood. We explore the antecedents, content, process, and consequences of favors. We conclude our multi‐level analysis of favors with a discussion of the ‘breakeven’ point for favors–the point where favors tip from having a positive effect to having a negative effect on organization performance. We present an integrated framework to explain the dynamics of favors in emerging market business contexts, and develop propositions to guide future research.